UK inflation falls to 3.4%; Greggs hit by IT problem – business live | Business

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Greggs stores in cities including London, Manchester, Cardiff and Glasgow have reportedly been hit by the technical issues preventing them from accepting payments, PA Media reports.

Others asked customers to place orders outside using the Greggs mobile app before food could be given to them, they add.

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Another report of tech problems at Greggs today:

Greggs stores hit by IT problem

The pound has slipped against the US dollar this morning, after inflation fell faster than expected.

Sterling is down 0.2% at just below $1.27, which would be its lowest closing level in two weeks.

The Bank of England isn’t expected to cut interest rates as soon as this month, though.

It will announce its latest decision at noon on Thursday, and the money markets indicate there’s a 97% chance that the BoE leaves rates on hold at 5.25%.

The UK’s “disinflationary tailwind” should allow the Bank of England to cut interest rates this year, explains Charles Hepworth, investment director at GAM Investments:

“Consumer inflation in the UK continues its slow descent towards the 2% base camp, recording a slightly quicker than expected fall to 3.4% in February from the 4% level in January.

Coupled with goods inflation slowing we also saw producer price input inflation fall more than expected, declining 0.4% over the month. This should help translate into additional inflation slowing effects in the months ahead. This disinflationary tailwind will encourage market expectations of rate cuts coming this summer and market forecasts expect three 0.25% cuts for the year in total. This is likely the best a government pushing for an autumn election could hope for.”

Explaining February’s drop in inflation, ONS Chief Economist Grant Fitzner says:

“Inflation eased in February to its lowest rate for nearly two and half years.

“Food prices were the main driver of the fall, with prices almost unchanged this year compared with a large rise last year, while restaurant and café price rises also slowed.

“These falls were only partially offset by price rises at the pump and a further increase in rental costs.”

Another encouraging sign for inflation is that UK factories paid less for their raw materials last month.

The latest producer price inflation report, also released this morning, showed that factory input prices fell by 0.4% on a monthly basis in February – a sign that inflationary pressures eased.

But producers still raised their prices, with output prices rising by 0.3% in February.

The ONS adds:

• Producer input prices fell by 2.7% in the year to February 2024, up from a revised fall of 2.8% in the year to January 2024.

• Producer output (factory gate) prices rose by 0.4% in the year to February 2024, up from a revised fall of 0.3% in the year to January 2024.

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The financial markets are still expecting the Bank of England to cut interest rates three times this year, starting in the summer.

That would bring rates down to 4.5% by December, from 5.25% today.

Victoria Scholar, Head of Investment at interactive investor, tells us:

Inflation is certainly moving in the right direction, quicker than expected and is forecast to reach the 2% target in the months ahead. Global factors such as easing global supply chain pressures and cooling energy prices combined with higher interest rates from the Bank of England have helped price pressures retreat from a 40-year high seen in October 2022.

Markets are pricing in a longer wait for the first rate cut from the Bank of England than other central banks such as the US Federal Reserve with growing positive bets on the pound from hedge funds and traders reflecting this view.

UK rate futures markets are pointing to 71 basis points of rate cuts from the Bank of England by December, up very modestly from 67 basis points before today’s inflation data. Most economists anticipate the central bank will begin cutting in June.”

Today’s inflation report does not reflect the full impact of the cost of living squeeze,

Dr Sarah Cumbers, chief executive of the Royal Statistical Society, explains:

“While it’s good to see inflation coming down, we should remember that CPI was never intended to measure the impact of inflation on households.

“Its exclusion of interest payments such as mortgages and loans – and the greater weight it gives to higher spending households – means people’s experiences of inflation, particularly those on lower incomes, are not adequately reflected in the figures.

“I would encourage policymakers to take into account the Household Costs Indices, now published quarterly by ONS as the best way to understand the impact of inflation on different groups.”

The most recent Household Costs Indices, released last month, showed that households with a mortage had the highest inflation rate at the end of last year, followed by private renters, with outright owner occupiers experiencing the lowest rate.

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