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Inflation fell, but not by enough

The Bank of England Photo: Reuters

The rate of inflation continued to slow in February, to 3.4% – the lowest in over a year. It’s good news for anyone whose income hasn’t kept pace with inflation (and that includes most people) as that trajectory is expected to continue falling this year.

And yet … the rate was slightly higher than expected (the consensus amongst economists was for it to fall slightly further to 3.3%). Could this signal something more worrying?

The main element keeping inflation up was alcohol or spirits Credit: Reuters

The main element keeping inflation up was alcohol or spirits, to be exact, up a record 2.6% between January and February this year compared with last year.

Food prices are also rising as the drought conditions in parts of the UK (and, indeed Europe) begin to make themselves felt.

The third element to watch is the most important, in my view. Drivers will already be aware of high petrol prices, driven in part by the higher raw material costs as crude oil climbs upwards. Keep an eye on those oil prices as our inflation may yet be knocked off course by them.

Drivers will already be aware of high petrol prices Credit: Reuters