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Last Updated: Tuesday, 16 March, 2004, 09:40 GMT
UK sees inflation fall in February
Shoppers in London
There has not been a sharp price hike following January sales
Inflation in Britain fell to 1.3% during February, well below the Bank of England's 2.0% target.

The government's preferred consumer prices index (CPI) dropped by a tenth of a percentage point last month.

The decline was because there had been no drastic price-cutting in January sales, which meant no large rise when it came to pricing goods in February.

The underlying rate of inflation fell to 2.3% from 2.4% in January, the Office for National Statistics added.

The headline rate of RPI inflation, which includes mortgage interest payments, fell by a tenth of a percentage point to 2.5% in February.

Interest decision

The figures are good news for the Chancellor, who is hoping to give an upbeat view of the economy when he announces the 2004 Budget on Wednesday.

A guide to the ups and downs of the UK economy

Consumer price inflation has now been below the Bank of England's new target since May 1998.

The slight drop in inflation will boost hopes for a no-change decision on interest rates next month.

The Bank of England raised interest rates in February to 4%

Many analysts believe the quarter point rise - the second in three months - was down to the bank's Monetary Policy Committee being more concerned about reining in consumer debt levels and house price inflation, which is not included in the CPI measure.

Household bills

The rate of inflation is based on a basket of 650 goods and services.

Gin, frozen turkey slices, and exercise bikes are on their way out 'to reflect changing tastes and spending patterns'

As well as a restrained start to the year on the High Street, inflation was also pegged back by discounts on recreational items, such as toys and audio visual products, compared with higher prices.

But price recoveries for furniture and furnishings were stronger following the sales than a year ago, preventing the inflation rate from falling further.

There was also an upward effect from increased household bills for mobile phone calls, and gas and electricity charges.

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