Inflation drops to 3.4% in February in "a win for Britain's borrowers"

There will be many celebrating the fact that the UK is no longer an inflation nation today, after a larger than expected fall to 3.4%, and a clear trajectory to the magical 2% level now in sight. Whilst there is still a lot of global and national pressures to play out, it should relieve some pressures on SWAP rates, which will see lenders start to reduce mortgage rates once more. What the markets and the high street need, however, is some positive and decisive rhetoric from the Bank of England, confirming that whilst there will be no surprise cut this month, the first reduction will come imminently. An early rate cut before the summer will do wonders for consumer confidence and sentiment is everything.

Even though inflation has fallen to the lowest level since Autumn 2021 and we are well on the way to hitting the target of 2% in April, the Bank of England is still likely to hold rates. However, the greater than expected fall does draw us closer to the cut we all desperately wait for. This is a win for Britain's borrowers.

It’s great news that inflation has reduced even more than anticipated, but I don’t see this pushing the Bank of England to cut the base rate quite yet. Even though a cut would do wonders for confidence levels and relieve the financial pressures of mortgage holders, the Bank of England is likely to hold steady for now.

The Bank of England should reduce the base rate on the back of positive data like this. There is no doubt that homeowners who have been stretched due to the cost of living over the past two years could really benefit from lower rates, especially those coming out of fixed deals this year. For some, the mortgage pinch hasn’t yet been felt and the Bank of England could now take the pressure off.

This dramatic drop in inflation is incredibly welcome to borrowers and the broader economy. Hopefully this will be sufficient to see mortgage lenders reduce their rates even though it is still unlikely to sway the Bank of England from reducing the base rate before the summer.

There will be a collective sigh of relief from borrowers this morning as inflation falls to 3.4%, beating market expectations. However Andrew Bailey's base rate brinksmanship means that, despite these figures, the Bank of England is unlikley to budge when they meet tomorrow. There are some real positives in these numbers with food and hospitality in particular and this bodes well for the next couple of months as the lower energy price cap works its way into the numbers. This could help us hit the 2% target before summer.

The pressure gauge is at bursting point at the Bank of England. It's about time they reduced rates. Despite these figures, let's not set off the party poppers quite yet. This basically reads that no one went out to restaurants or pubs, no one ate and no one used heating over winter period, no one fills up their cars anymore, hence reductions in these consumables.

Finally, we have some positive news to greet us. Inflation has fallen fallen further than the market's expectations of a drop to 3.4%. However, this does not guarantee a positive response from the Bank of England tomorrow in the form a rate cut. Despite the encouraging date, it seems unlikely that the Bank of England will make any moves until June after reviewing the full impact of the higher minimum wage, which takes effect from April.

A larger reduction in the headline rate and core rate of inflation is great news for mortgage holders and the wider economy. Both desperately need rate cuts. This will have added weight to the rationale to cut, but not turbocharged the idea. This super-hawkish Monetary Policy Committee is wedded to the idea of rates being held ‘higher for longer’, ensuring inflation doesn’t creep back in if they cut too fast or too soon.