Inflation drop renews calls for rate cut
Wednesday 24 March 1999
Heavy discounting on the high street helped take the underlying inflation rate down to 2.4 per cent in February, the first time it has dipped below its 2.5 per cent target since November 1994. Falls in second-hand car prices were another factor behind the surprise 0.2-point tumble in underlying inflation, according to data from the Office for National Statistics (ONS).
There was an even sharper fall in the headline rate of inflation, which dropped 0.3 points to a five-year low of 2.1 per cent. Recent falls in borrowing costs, which are not included in the underlying inflation measure, wiped almost 0.2 points from the headline rate in February.
Additional downward effects on inflation came from alcohol and chemist goods, although these were partially offset by food price inflation, which hit a two-and-a-half year high.
Sterling weakened to over 67p against the euro following the release of the figures, although it later made up lost ground to close at 66.8p. Short sterling surged as analysts re-evaluated the chances of another interest rate cut next month.
The data prompted renewed rate cut calls from industry. Ian Peters, deputy director general of the British Chambers of Commerce, said: "The figures strengthen our view that the Bank of England should cut rates by half a per cent."
Analysts warned that the next set of inflation figures, which will take account of Budget increases in tobacco and petrol duty, are likely to be less favourable. The Budget changes could add almost 0.5 per cent to headline inflation, according to the ONS. However, few analysts thought these temporary effects would stand in the way of further rate cuts from the Bank.
Speaking in Manchester last night, DeAnne Julius, a member of the nine- strong Bank of England Monetary Policy Committee, said she hoped flexibility in the service sector would allow the economy to combine a high level of employment with low inflation.
Data released by the Engineering Employers' Federation yesterday showed that pay deals in the sector stabilised in the three months to February at 2.6 per cent.
- 1 Howard Jacobson: Let's see the 'criticism' of Israel for what it really is
- 2 Gingers face extinction due to climate change, scientists warn
- 3 Brazil vs Germany World Cup 2014: In defence of Mesut Ozil - the Arsenal midfielder works magic in the shadows
- 4 BBC’s new Game of Thrones slayer 'The Last Kingdom' relies on Saxon appeal, creators say
- 5 PornHub begs users to stop uploading video clips of Brazil getting beaten 7-1
Game of Thrones author George RR Martin says 'f*** you' to fans who fear he will die before finishing Westeros saga
Jennifer Lawrence face palms Emma Watson at Christian Dior show in Paris
Gingers face extinction due to climate change, scientists warn
Pamplona Running of the Bulls 2014: Briton critically injured in San Fermin festival
Israel's deadliest Gaza air strikes yet kill five children from same family as Palestinian rocket barrage continues
Sustained immigration has not harmed Britons' employment, say government advisers
British jihadist calls for 'flag of Islam' over Downing Street and Buckingham Palace
Australia facing international condemnation after turning around Sri Lankans at sea
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
There’s a nasty smell in the political air – and it’s coming from the Tories
iJobs Money & Business
competitive: Progressive Recruitment: A world leading banking organisation are...
£500 - £1000 per day: Harrington Starr: Harrington Starr are urgently recruiti...
£75000 - £100000 per annum: Cameron Kennedy Recruitment: We urgently require f...
£40000 - £50000 per annum + competitive package: Orgtel: Investment Banking Sa...