Cost of living still rising - and so we're not expecting rate cut just yetpublished at 08:13 Greenwich Mean Time 20 March

08:13 GMT 20 March

Dharshini David
Chief economics correspondent

The same factors that triggered the cost of living crisis - wholesale global food and energy costs - combined with previous interest rate hikes from the Bank of England are largely behind the slowing of price rises over the last year, and should continue to fuel the decline.

The gap between the UK and the EU and the US is closing. And a drop in the domestic energy price cap should bring inflation down to below the Bank’s 2% target later this spring.

But remember: inflation still means the cost of living is still rising. Food is still 5% more expensive than a year ago, rents continue to climb. And, crucially, inflation in services - which covers the likes of hotel stays and insurance premiums - remains at 6.1%.

That concerns some members of the Bank of England’s interest rate panel.

They want to be confident that such price pressures are under control, and so inflation likely to remain around target in the longer term.

What they term "the last mile" in bringing down inflation can be the hardest. So economists don’t expect interest rate cuts to begin until the summer.

But the Bank remains also mindful of the less palatable side-effects of higher interest rates; they work by squeezing spending power, unhelpful at a time of stagnant growth.

Image source, Getty Images

The largest driver for easing inflation in February was slower food price rises.

Bread and cereals prices rose the slowest, growing 0.3% on the month.

Packs of cakes, and some types of bread, including white sliced loaves, even fell between January and February.

Between February last year and this, the pace of price rises for bread and cereals was 6%, the lowest rate of growth since March 2022.

Meat, vegetables, milk, cheese and eggs prices also rose more slowly.

However, inflation for oils and fats rose from 8% in January to 8.3% in February.

Olive oil production in Spain has been hit by poor harvests due to drought attributed to climate change.

Image source, Getty Images

Bank of England policymakers are due to have a meeting on Thursday to decide on whether to cut, hold or raise interest rates.

The Bank has been holding rates steady - after 14 recent rises - as it tries to tame inflation on the one hand, while avoiding damaging the economy on the other.

Although the rate of inflation eased slightly more than expected in February, some economists predict that the Bank will continue to hold rates.

Paul Dales, chief UK economist at Capital Economics, said he expects rates to remain at 5.25%.

But he thinks inflation will fall below 2% in April and then ease towards 1%.

This suggests the Bank "may have to start cutting rates in the summer and reduce them to 3% next year" he said.

Grant Fitzner, chief economist at the Office for National Statistics, has been telling the BBC's Radio 4's Today programme why inflation has fallen to its lowest level in over two years.

It is partly driven by food price inflation coming down "quite a bit" from 6.9% to 5% , he says. In fact, food price inflation has fallen for 11 consecutive months.

Restaurant and hotel inflation rates also fell back.

But this has been offset by an uptick in petrol and diesel prices in the last month, he adds.

Looking at the longer term trends, Fitzner points out that the Bank of England and the Office of Budget Responsibility "are projecting further falls in inflation in coming months". This is partly due to food prices and lower energy prices.

A change in the rate of inflation affects everyone differently - depending on what goods and services we buy and use.

The BBC, in collaboration with the Office for National Statistics, has put together a personal inflation calculator.

• You can find that calculator here.

Image source, EPA-EFE/REX/Shutterstock

Shadow chancellor Rachel Reeves says "prices are still high" despite the latest fall in the rate of inflation.

She also criticises the prime minister for "putting forward a reckless £46bn unfunded tax plan to abolish National Insurance that would risk crashing the economy and re-running the disastrous Liz Truss experiment".

Image source, Getty Images

Although food prices were still rising quite quickly - at 5% in the year to February - this rate was down from a 7% rise in January.

The slower pace of food price rises helped push down overall inflation, along with soft drinks, restaurants and hotels, the Office for National Statistics said.

This effect was partially offset by petrol prices and rental costs.

Image source, PA Media

Chancellor Jeremy Hunt says the drop in inflation "sets the scene for better economic conditions" in the country.

He says the latest figures show the government's "plan is working", and could help ministers in their "ambition" to reduce National Insurance further.

The fall in inflation means it is at its lowest level since September 2021, when it stood at 3.1%.

Inflation, the rate at which prices rise over time, has been gradually falling since it hit 11.1% in October 2022, its highest rate for 40 years.

However, prices are not yet falling they are just rising less quickly than they were previously.

The pace of general price rises has slowed, falling to 3.4% in February, according to official figures from the Office for National Statistics.

This is down from 4% in January and December, and the lowest rate or nearly two and a half years.

However, the rate of inflation is still above the Bank of England's 2% target.

Emmanuella Alausa
Business reporter

The UK inflation rate reached peaked at a 41-year high of 11.1% in October 2022 and has gradually eased since.

Although, there has been little progress in the last three months, with January at 4%, a sharp fall in February is expected to be confirmed today, just a day before the Bank of England’s latest interest rate setting decision.

Economists expect inflation to sink to 3.5% today, the lowest in two and a half years, according to a survey by Bloomberg last Friday.

It predicts reduced food and goods inflation will help drive the rate lower before a plunge in energy bills trigger a more marked step down in April, when economists expect a dip below the Bank of England's 2% inflation target.

As we wait for the latest inflation figures to be released by the Office for National Statistics, let's take a moment to recap the national picture over the past couple of years.

UK inflation peaked at 11.1% in October 2022, the highest rate for 40 years.

For context, the Bank of England’s remit is to maintain inflation - the key measure for rate of price rises - at around 2%.

As the graph above shows, the UK's inflation rate has been above that target since late 2021 - which led to the Bank consistently raising interest rates for more than two years.

It is also important to remember that although inflation is lower than it was previously, prices are still rising - just at a slower pace.

Image source, Getty Images

Last month, UK inflation held at 4% - unchanged from the previous month.

The main driver behind the figure was an upward contribution from housing and higher energy charges - while the biggest downward factor came from food, non-alcoholic drink, furniture and household goods.

Food prices also saw their first monthly drop for more than two years.

Today's inflation figures come just two weeks after Chancellor Jeremy Hunt unveiled his Spring Budget.The Budget could be the last big announcement of the government’s financial plans before the next general election. But what did the chancellor pledge?

• National Insurance was cut for workers by another 2p - having already fallen by 2p in last year’s Autumn Statement
• The earnings threshold for child benefit was raised from £50,000 to £60,000
• And the VAT threshold for small businesses increased from £85,000 to £90,000
• The Household Support Fund for families in England was extended for six months, falling short of charities’ hopes of a two-year extension
• Alcohol duty was frozen and the 5p cut in fuel duty was extended
• And there are new taxes on vapes, and higher taxes for business class flights
• The windfall tax on the profits of oil and gas companies was extended until 2029, while capital gains tax was reduced for the higher rate of property from 28% to 24%
• And the non-dom tax break, claimed by wealthy foreign residents in the UK, was abolished - but new arrivals will still not pay tax on foreign income and gains for their first four years of UK residency

You can read more about Hunt's major announcements here.

Dharshini David
Chief economics correspondent

Image source, Getty Images

Today should see the rate at which prices are rising slowing further in February, with inflation easing to about 3.5%.

The very same factors that triggered the cost of living crisis, global food and energy costs have also played a huge part in bringing it down. A fall in the domestic energy price cap should bring it down to below the Bank of England's 2% target later in spring.

A sharp rise in the price of meals out last February should also help make these figures look better (remember, inflation measures price movements compared a to a year ago).

But some bills continue to climb substantially - particularly those for services, the likes of insurance premiums and mobile phone tariffs. It’s the persistence of that services inflation, which in January was at 6.5%, which concerns the Bank of England, which is charged with taming price pressures.

And that’s why economists still think it’ll be a few months until the Bank is confident that inflation is not only back in line with its target but is set to remain so.

Inflation measures how quickly prices are rising (or very occasionally falling) for goods and services.

And a series of shocks to the economy over recent years has caused high inflation, the Bank of England says.

First, the Covid pandemic pushed prices up as more people bought goods - but there were problems getting enough of the goods, particularly with importing them from abroad.

Second, the war in Ukraine led to large increases in the price of gas and food.

Then, a big fall in the number of people available to work meant employers began offering higher wages to job applicants, with many businesses increasing their prices to cover these costs.

It is important to understand that things will continue to cost more than they did before, even if the rate of inflation falls.

Nathan Williams
Live reporter

Good morning and welcome to our live coverage as we get ready to find out the latest inflation figures in the UK.

In last month’s figures, the rate of price rises remained unchanged from the previous month - at 4% for both December and January.

Economists are expecting a drop to around 3.5%, which would bring the rate of price rises closer to the Bank of England’s 2% target.

We’ll know for sure at 07:00 GMT. Until then, stay with us for live updates and analysis.