UK inflation approaching a trough

Last month saw the UK headline inflation rate fall to a record low of 0.0%y/y, largely driven by falls in petrol and food prices. The peak impact of the cuts to energy tariffs announced so far is set to feed through into the March numbers. 

"Alongside further weakness in food prices, these should push inflation lower and we expect a brief dip into negative territory to -0.1% on Tuesday", says Lloyds Bank in a report on Monday.

Despite the likelihood of near-zero price inflation over the next few months, the central view of the MPC remains that the next move in the policy rate is likely to be upward. 

Notwithstanding a modest expected decline in the 'core' rate of inflation, the 'sticky' nature of this measure suggests that underlying deflationary pressures are not materially building.