Consumer prices were just slightly softer than expected in February. With base effects quite strongly negative (the CPI jumped an unusually large monthly 0.7 percent in February 2017), a 0.4 percent rise in prices versus January reduced the annual inflation rate from 3.0 percent to 2.7 percent. This was the lowest yearly rate since last July.
The main downward impact on the monthly change in annual inflation came from transport where a fall in petrol prices contrasted with a rise over the same period in 2017 to reduce the headline rate by almost 0.1 percentage points. Food and soft drinks, where prices edged just 0.1 percent higher after a 0.8 percent spike last year, also subtracted as did restaurants and hotels. The only significant, albeit partial offset, came from clothing and shoes where the seasonal advance in prices was less than in February 2017.
As a result, the core CPI increased 0.6, lowering its yearly rate from 2.7 percent to 2.4 percent, its weakest outturn since March 2017.
The slide in February inflation should reduce the chances of a surprise hike in official interest rates at the BoE's MPC meeting on Thursday. Indeed, the annual rate was 0.2 percentage points short of the central bank's latest forecast. However, the Bank clearly has a tightening bias and another rate hike in May remains very much on the cards. To this end, tomorrow's labour market report could be particularly significant.
Note that from next month publication of the CPI will move from Tuesday to Wednesday.