By Jason Douglas and Wiktor Szary

 

LONDON--Annual inflation in the U.K. slowed in February, as the lingering effects of a steep decline in the pound following 2016's Brexit vote began to fade.

The slowdown suggests that a squeeze on consumers from rising prices and meager wage growth is set to ease, potentially supporting growth in the wider economy through 2018. Still, most forecasters expect the U.K. to lag its peers as uncertainty over its future ties to the European Union weighs on business activity and investment.

Consumer prices rose 2.7% on year in February, the Office for National Statistics said Tuesday, compared with a rise of 3% a month earlier.

The decline reflected a fall in gasoline prices in February and weaker gains in prices of food and other goods than a year earlier, suggesting the effects of the 2016 depreciation have mostly dissipated, the ONS said. The fall in the pound following voters' decision to leave the EU-propelled consumer-price inflation above the Bank of England's 2% target for most of 2017.

The BOE is expected to hold its benchmark interest rate steady this month when officials conclude their March policy meeting Thursday.

Officials have telegraphed that they expect to nudge up their benchmark rate two or three times over the next few years to keep price-growth in check. The next move could come as soon as May.

Central banks around the world are stepping back from the easy-money policies they pursued for a decade as most major economies enjoy a rare, synchronized expansion. The U.S. Federal Reserve is expected to raise short-term interest rates this month, while the European Central Bank has signaled it may not extend its massive bond-buying program beyond September.

Figures Tuesday showed wider inflationary pressures in the U.K. economy eased in February, with the prices charged by companies at the factory gate rising 2.6% on year, compared with a rise of 2.8% a month earlier. Firms' raw material costs rose 3.4%, against a rise of 4.5% in January.

 

Write to Jason Douglas at Jason.Douglas@wsj.com and Wiktor Szary at Wiktor.Szary@wsj.com

 

(END) Dow Jones Newswires

March 20, 2018 05:51 ET (09:51 GMT)

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