UK inflation fell by more than expected in February, with the consumer prices index down from 3% to 2.8%.
The Office for National Statistics said the drop was driven by a decrease in overall pricing for clothing and footwear. Small increases in prices on some items such as alcoholic drinks had little impact, it said.
The rate of inflation is still higher than the Bank of England’s target of 2%, however.
Treasury chief secretary Darren Jones responded to the figures: “Our number one mission is kickstarting growth to raise living standards for working people, that is why we are protecting working people’s payslips from higher taxes.
“In a changing world, we’re focused on delivering economic stability to secure people’s finances – freezing fuel duty, protecting the triple lock and increasing the national living wage by £1,400 a year for full-time workers, while going further and faster to drive growth through our plan for change.”
The drop in rate has led analysts to predict that the Bank of England could cut interest rates in May, which will further ease living costs for workers.
All three main measures of inflation dropped by 0.2 percentage points. CPI stood at 2.8% in the 12 months to February. CPI including owner-occupier housing costs (CPIH) was 3.7%, while the retail prices index (RPI), the measure often cited by trade unions, stood at 3.4%.
Many employees would get “light relief” from the drop in inflation after grappling with financial uncertainty, according to Lily Megson, policy director at My Pension Expert.
“After years of economic turbulence, any sense of stability and a lower cost of living will be welcomed. That said, the long-term impact of high inflation is still being felt,” she said.
Today (26 March) also sees chancellor Rachel Reeves announce the government’s Spring Statement. She is expected to confirm a range of cuts to welfare spending, including reductions in support for people with disabilities and long-term health conditions.
Paul Nowak, general secretary of the TUC, said the chancellor’s plans would have a “key role to play in reviving growth”.
“That’s why the Bank should cut interest rates at the start of next month – and continue to do so throughout the year.
“Lower interest rates will help ease the pressure on households, businesses and government borrowing. They will mean more money in working people’s pockets to spend on our high streets, and more money for firms so that they feel confident to invest.”
Sarah Coles, head of personal finance at Hargreaves Lansdown, warned that the downward trend in inflation could reverse next month, however: “Like an over-refreshed pub-goer after midnight, inflation has staggered uncertainly in a new direction again, falling from 3% to 2.8%. It’s not a major shift, but it’s not what markets were expecting.
“It’s expected to lurch back to growth again next month, and then keep rising in April once the price rises of Awful April kick in.”
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