Inflation drops to 3%
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The Consumer Prices Index, the government’s target measure of inflation, fell to 3% in February from 3.5% in January.
The latest figures from the Office for National Statistics show that the CPI was pushed down by lower prices of computer games and toys.
Prices were up on last year for clothing and footwear, particularly women’s clothes.
The Bank of England aims for the CPI measure of inflation to be at 2%.
In the year to February, annual inflation according to the alternative Retail Prices Index stood at 3.7%, unchanged from January.
The ONS says that housing costs are pushing the index upwards, and in particular mortgage payments.
This is because although mortgage payments are still lower than last year, the margin is not as significant.
Mortgage payments fell by 0.2% this year but by fell by 7.3% a year ago, after the Bank of England base rate was cut from 2% to 1.5% in January 2009.
RPIX inflation, which measures the same factors as the RPI but excludes mortgage interest payments was 4.2% in February, down from 4.6% in January.
Owen James, economist at the Centre for Economics and Business Research, says: “Probably the main risk in the short term to the Bank’s target rate comes from a significant sterling depreciation.
“A Budget tomorrow that eases market concerns over the United Kingdoms fiscal position will help make this scenario less likely.
“On balance our view is still that significant space capacity and weak earnings growth will cause inflation will fall back later this year.”
