Business

Food prices on the rise but inflation remains subdued

The cost of food rose last month

FOOD prices may be rising but the falling cost of used cards means inflation remained at 0.3 per cent last month.

According to figures from the Office for National Statistics (ONS) said the cost of second-hand cars fell 5.6 per cent year-on-year in February, while motorbikes and bicycles also dropped 3.6 per cent over the same period.

Food prices were down by 2.4 per cent compared with February last year, but the fall was smaller than the 2.8 per cent annual drop seen in January, driven in part by the rising price of potato crisps.

Despite February's 0.3 per cent rise in the Consumer Prices Index (CPI), inflation still remains historically low, with the Bank of England predicting it to stay far below the Government's target for some time.

Sharply lower oil prices have also kept a lid on inflation, leaving the central bank in no hurry to raise rates above 0.5 per cent, where they have remained for nearly seven years.

Danske Bank chief economist in Northern Ireland Angela McGowan said the low inflation figures were "always good news for consumers".

"For the Bank of England's interest rate policy this subdued level of inflation and relatively low wage growth translates into a ‘stay on hold' position for an extended period," she said.

"At Danske Bank we still think the Bank of England could introduce a very small hike in rates in the first half of 2017, but with great uncertainty surrounding the EU referendum, things could change rapidly after that. The upcoming EU referendum represents a significant event risk for sterling and a medium to long term risk factor for the UK economy.”

A large upward impact on February's rate of inflation came from food and non-alcoholic beverages, which saw overall prices rise by 0.1 per cent during the month, compared with a fall of 0.2 per cent a year ago.

Meanwhile, transport had a downward effect, with prices for January and February this year remaining unchanged, compared with a rise of 0.4 per cent between the same two months a year ago.

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