The latest inflation report reveals a slight easing in price pressures, with the consumer price index rising by 2.8 percent in February on a year-over-year basis, down from 3.0 percent in January and 0.1 percentage points below the consensus. This easing is primarily driven by core inflation, which excludes volatile items such as energy and food, decreasing to 3.5 percent from 3.7 percent. The service remains stable, with CPI services inflation remaining at 5.0 percent.

Despite the annual decrease, monthly CPI rose by 0.4 percent, a reversal from January's 0.1 percent fall. This suggests a short-term cost pressure persist. The CPI, including owner-occupiers' housing costs (CPIH), decreased from 3.9 percent to 3.7 percent on the year, with alcoholic beverages, tobacco and communication costs being the primary inflationary drivers, clothing and footwear, recreation and household services provided some relief.

Core CPIH eased slightly, rising 4.4 percent from 4.6 percent on the year. This reflects slight improvement in underlying inflationary pressures. The divergence between goods and services inflation, with services inflation nearly seven times higher, signals persistent cost-push factors that could challenge monetary policy decisions in the coming months. The latest update takes the UK RPI to 13 and RPI-P to 8. This means that economic activities are generally ahead of market expectations of the UK economy.

UK annual inflation seen at 2.9 percent in February versus 3.0 percent in January. Month on month, the consensus looks for a 0.5 percent bounce after minus 0.1 percent in January.

The consumer price index (CPI) is an average measure of the level of the prices of goods and services bought for the purpose of consumption by the vast majority of households in the UK. It is calculated using the same methodology developed by Eurostat, the European Union's statistical agency, for its harmonised index of consumer prices (HICP). The CPI is the Bank of England's target inflation measure.

The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries such as the UK, where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer. Inflation is an increase in the overall price level of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments.

Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.

By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.

For monetary policy, the Bank of England generally follows the annual change in the consumer price index which is calculated using the European Union's Eurostat methodology so that inflation can be compared across EU member states.