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UK inflation hits four-year low of 1.7%

by Eleanor Lawrie on Mar 25, 2014 at 10:09

UK inflation hits four-year low of 1.7%

UK Inflation fell to a four-year low of 1.7% in February, the fifth monthly drop in a row.

The reading, which was down from 1.9% in January, meant the cost of living is now well below the Bank of England's 2% target.

The fall was prompted by the biggest fall in fuel prices since 2009, and also from price pressure on household services and clothing, although price drops were slightly offset by household goods and recreation sectors getting more expensive.

With interest rates at historic lows, today's reading will reduce pressure on the Bank of England, including governor Mark Carney (pictured) to raise the cost of borrowing in the near future.

'In our view, a favourable combination of lower import prices, flat commodity prices and recovering productivity is likely to help CPI inflation fall further, perhaps to about 1% by the end of the year. This would both support the recovery by boosting real income growth and allow the MPC to keep official interest rates on hold until well into next year,' Samuel Tombs, UK Economist at Capital Economics said.

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