Inflations falls to 4-year low at 1.7% in February

Fall in inflation increases likelihood of real wages turning positive in the coming months

A fall in petrol prices pushed the UK's inflation rate to a four-year low of 1.7 per cent, easing pressure on Britons as the gap between price increases and wage growth continues to narrow.

The Consumer Price Index (CPI) measure of inflation fell further below the Bank of England's target of 2 per cent in February, from 1.9 per cent in January, the Office for National Statistics (ONS) said.

Average total earnings rose 1.4 per cent in the three months to January, suggesting private sector pay growth has already caught up with inflation at 1.7 per cent. Ordinary public sector workers rises lagged behind at 0.9 per cent.

Average petrol prices fell by 0.8p per litre between January and February, compared with a rise of 4p a year ago. Diesel prices dropped by 0.8p, compared with a 3.7p rise the year before.

Inflation measured by the Retail Price Index (RPI)  fell to 2.7 per cent in February from 2.8 per cent in January.

Martin Beck, senior economic adviser to the EY Item Club, said: "There is now a distinct possibility that real wage growth will hit positive territory in April, helping to support household spending."

David Cameron said inflation figures show the government's "long-term economic plan".

George Osborne tweeted: "The job is far from done but another sign our economic plan's working."

TUC general secretary Frances O'Grady said the fall in inflation hide the "longest cut in real wages since the 1870s" with pay packets at "about the same level that they were 10 years ago".

She added: "These figures underline just how far we have to go to restore living standards so that ordinary people share in the recovery. Britain needs a pay rise."

Shadow Treasury minister Catherine McKinnell said: "This fall in the inflation rate is welcome, but the squeeze continues as prices are still rising faster than wages.

"Working people facing this cost-of-living crisis are on average £1,600 a year worse off since David Cameron came to office."

The fall in inflation is also likely to give the Bank of England breathing space to keep rates at a record low of 0.5 per cent.

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