Inflation cools more than expected in UK, easing pressure on BoE

Figures show annual price growth slowed to 3.4% in February, fueling hopes for rate cut reprieve.

Inflation cools more than expected in UK, easing pressure on BoE
UK Economy

Britain's inflation rate cooled by more than anticipated in February, potentially offering the Bank of England leeway to ease the pace of interest rate hikes. Consumer prices rose 3.4% from a year earlier, slowing from 4% in January and marking the lowest inflation since September 2021, according to data released Wednesday by the Office for National Statistics.

The reading undershot economists' forecast of 3.5% and the central bank's expectations, providing a glimmer of optimism ahead of the BoE's rate decision on Thursday. Core inflation, which strips out volatile food and energy costs, slowed to 4.5% from 5.1% the prior month, against projections of 4.6%.

Services inflation, a key metric monitored by policymakers, decelerated to 6.1% from 6.5%, aligning with the BoE's projections last month. The figures buoyed hopes that the central bank could soon pause its aggressive tightening cycle, with markets pricing in a potential rate cut by August.

The British pound (GBPUSD) initially wobbled on the news before recovering to trade at $1.2721 by 7:30 a.m. GMT as investors evaluated the report's implications.

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