The fall reflected a big drop in the rate of food price inflation from the highs reached early last year.
With the cap on energy prices set to fall by 12%, experts said inflation could drop below the Bank of England’s 2% target next month. Further reductions are likely in the summer.
The slowdown in the inflation rate should help ease the pressure on consumers, who have faced a cost of living crisis amid the surge in inflation fuelled by the recovery from the pandemic and Russia’s war on Ukraine.
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“The fall in food inflation, especially on staples like bread and cereals, to the lowest level since January 2022, is a big deal for households,” said Myron Jobson, Senior Personal Finance Analyst at interactive investor.
Martin Beck, chief economic adviser to the EY Item Club, said the fall in the inflation rate may help persuade members of the bank’s Monetary Policy Committee that they can start to reverse the interest rate rises they imposed to tackle inflation.
The MPC raised its base rate 14 times, from 0.1% in December 2021. The last increase of 0.25% in August took rates to a 16-year high of 5.25%.
The rise in rates left many homeowners facing sharp increases in their mortgage repayments.
The MPC will announce the outcome of its latest rate setting meeting on Thursday.
Mr Beck said the Bank of England and economists had expected the inflation rate to fall to 3.5% in February. However, noting that services inflation is falling relatively slowly compared with the rate for more volatile items such as food, he cautioned that the bank would likely wait until later this year before cutting interest rates.
“The MPC has made clear that it is more interested in what’s happening to services inflation, which it sees as a better guide to underlying pressures,” said Mr Beck.
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David Bharier, head of research at the British Chambers of Commerce, cautioned: “Two years into this inflation shock and prices have simply stabilised at a much higher level.”
The 3.4% CPI figure was the lowest annual rate recorded since 2021.
The ONS said the annual rate of service price inflation fell to 6.1% in February from 6.5% in January. The rate of goods price inflation fell to 1.1% from 1.8%.
At its meeting in January the MPC voted six to three to maintain Bank Rate at 5.25%.
Two members wanted to increase the rate by 0.25 percentage points, to 5.5%. One wanted to reduce the rate to 5%.