Food feeds into lower inflation level as headline rate drops to 3.4%

Falling food costs fed a bigger than expected drop in the inflation rate, new figures showed today (March 20).

The annual headline rate fell from four per cent last month to 3.4% in February, lower than the anticipated 3.5% level, and on a par with levels two-and-a-half years ago.

Data from the Office for National Statistics (ONS) revealed food prices were almost flat this year compared with a large rise last year, while restaurant and café price rises also slowed.

ONS chief economist, Grant Fitzner, said: “These falls were only partially offset by price rises at the (fuel) pump and a further increase in rental costs.”

Today’s progress will hearten Chancellor Jeremy Hunt and Prime Minister Rishi Sunak, with inflation forecast to fall back below the Bank of England’s target rate of two per cent in the next few months.

But the Bank of England is expected to resist calls for a further cut in interest rates at its next Monetary Policy Committee meeting.

The Chancellor responded by saying his “plan was working”.

But Labour’s shadow chancellor, Rachel Reeves, said prices were “still high” – and pointed out “the tax burden is the highest it has been in 70 years”.