![UK Inflation Eases, Raising Expectations of Interest Rate Cuts UK Inflation Eases, Raising Expectations of Interest Rate Cuts](https://usatribunemedia.com/wp-content/uploads/2024/03/5-30.png)
Official figures revealed on Wednesday that price rises in the UK Inflation eased more than expected in February, sparking anticipation that the Bank of England might initiate interest rate cuts in the coming months. According to the Office for National Statistics, inflation, as measured by the consumer price index, dropped to 3.4%, its lowest level since September 2021, down from 4% in January. The agency attributed the decline primarily to easing food price inflation.
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UK Inflation
The scale of the decrease surpassed analysts’ expectations, who had anticipated a decline to 3.6%. Despite remaining above the Bank of England’s 2% target, the trend in inflation is clear. Inflation soared to over 11% at the close of 2022 following Russia’s invasion of Ukraine, resulting in significant increases in energy costs.
The larger-than-expected decline comes a day before the bank’s nine rate-setters are set to announce their latest interest rate decision. Financial markets anticipate that the main interest rate will remain at a 16-year high of 5.25%. Investors will scrutinize the meeting minutes to gauge policymakers’ consideration of interest rate cuts, which could translate into lower mortgage rates.
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, remarked, “This notable decline is further evidence that the UK is fast approaching the finish line in its battle against surging inflation.”
The Bank of England, mirroring actions by the Fed and other central banks worldwide, aggressively raised interest rates in late 2021 from near zero to counteract price increases initially triggered by supply chain disruptions during the pandemic and exacerbated by Russia’s invasion of Ukraine, which drove up food and energy costs.
Heightened interest rates, which dampen economic activity by increasing borrowing costs and curbing spending, have played a role in lowering inflation globally. The governing Conservative Party in Britain hopes that declining inflation and interest rates might instigate a positive sentiment ahead of the upcoming general election, slated for January 2025. However, opinion polls currently indicate a significant lead for the main opposition Labour Party, suggesting a potential major victory over the Conservatives, who have held power since 2010.