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British inflation slowed from its highest level in six months

25 Mar 2020 12:41 PM

Inflation in the UK decreased during February, before the Coronavirus hit the country, and economists expect another sharp fall in the next two months due to the collapse of global oil prices due to the spread of the epidemic.

The Office for National Statistics said, consumer price inflation fell to 1.7% in February from a six-month high of 1.8% in January, and numbers came according to expectations.

Since last month, the price of oil halted in US dollars to below $ 28 a barrel, and economists expect that the negative impact of this on British inflation will comfortably offset the sharp drop in the pound to close to a 35-year low against the dollar.

Economists at Morgan Stanley said on Tuesday that the British economy would shrink by 10% from April to June due to the government shutdown, in which it has ordered a slowdown in the spread of the virus, which has so far killed 422 people in Britain.

Inflation is already well below the Bank of England's 2% target, after hitting its lowest in more than three years in December at 1.3%, and there was no immediate market reaction to the data today.

The Bank of England cut interest rates to a record low of 0.1% and increased the bond-buying program to help ease the economic blow to the Coronavirus.

On the other hand, retail price inflation, an older and less accurate measure still used for inflation-linked government bonds and some commercial contracts, fell to 2.5% from 2.7% in January. Also, producer price inflation - a measure that could give evidence of upcoming inflation pressures - slowed more than expected to 0.4% in February from 1.0% in January.

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