Inflation still on track for 1%

The further fall in CPI inflation in February is unlikely to be the last this year. Past movements in global commodity prices, recent announcements by energy suppliers and the emergence of a supermarket price war suggest that food and energy inflation will continue to ease this year.

In addition, core goods deflation still looks likely to return to the high street soon, thanks to the pound’s recent appreciation and the weakness of producer output prices. Accordingly, recent developments have made us feel even more comfortable with our below consensus call that CPI inflation will ease all the way to 1% by the end of this year.