The latest Office for National Statistics (ONS) revealed that the UK inflation rate fell to 2.8%.
This is after inflation in January rose to 3% from 2.5% in the previous month.
The biggest decline in monthly changes came from clothing, with the consumer price index further down, including housing costs for owner occupants in homes and home services.
Last week, economists predicted that the cost of living will remain 3% due to the increase in food and beverages.
On March 20, the Bank of England voted to keep interest rates at 4.5% in the face of higher wage demand and trade uncertainty caused by the global tariff war triggered by US President Donald Trump.
Interest rate makers of the bank’s monetary policy committee voted 8-1, with external members and long-term Dove Swati Dhingra pushing a quarter-point cut.
Policymakers reiterated their “gradual and cautious attitude” in the minutes of the March decision.
It said, “The larger or longer weakness in demand relative to supply may drive inflation and cut further.
But, “a higher supply with more durable relative to demand and domestic wages and prices will lead to stricter monetary policies.
Today’s unexpected data has been released ahead of Prime Minister Rachel Reeves’ spring statement.
“If nothing else, it would make the Prime Minister less worried because she boasted about opposition in this spring statement,” said Peter Stimson, head of product at Mpowered Mortgages.
“But, while inflation’s title rate and CPI’s more illustrative core rate are lower, they are still higher than what the Prime Minister and the Bank of England hoped.”
“Any breathing may be temporary, as April will bring inflation growth to households in the form of higher council tax laws and businesses. The form of surge in costs for hiring. In many cases, many companies are also likely to see many companies agree to annual salary, in many cases, at a rate higher than inflation.”
“The inflation shadows that have shrouded the British economy over the past three years have eased but have not been lifted. Things may get worse before they get better.”
“The question now is when can inflation be cooled to prompt the Bank of England to release its next base tax rate.”
“Although CPI is still well above the bank’s 2% target, economic growth is a major concern. The economy backed in January and the OBR is expected to cut its 2025 growth forecast, so it may only take one month for the bank to mitigate the inflationary swelling.”
“Currently, the swap market prices have lowered two more base rates in 2025, but as the economy stagnates, the bank may induce cuts faster. Base rates are likely to be below 4% at Christmas — at least that will be welcome news for 1.8 million households due to retirement this year.”
L&C Deputy Director of Mortgage David Hollingworth said the attention will trigger the prime minister’s spring statement.
“As the surprise of tax rate inflation in February will be welcome news,” Hollingworth commented.
“Although inflation is expected to drop slightly, today’s figures have exceeded expectations.”
“If mortgage rates help increase the prospect of market interest rate movement, that could have a positive impact on mortgage rates.”
“Nevertheless, today’s news may not be enough to substantially change forecasts, and while this is undoubtedly good news, it is widely believed that inflation will rise again in the coming months.”
“Interest rates are still higher than the Bank of England’s target rate. As the future rises further, the information on interest rates may remain one of the tax cuts, but gradually feeding.”
“The recent mortgage rates are more stable, and most lenders will make small progress when possible. Although today’s numbers are positive, I don’t expect a significant change in this pattern. Again, we want the market to increase inflation in the coming months.”
Meanwhile, Spicerhaart and Just Mortgages CEO John Phillips added: “When the Prime Minister prepares to issue a spring statement today, good news about inflation will be welcomed.”
“However, it seems like this may be just a situation, as the government’s policy on national insurance and other tax rate hikes will soon be filtered into the equation. This is the most important thing, namely changes in energy prices and council taxes, and any further geopolitical escalation we can see.”
“Economists think September is the peak of inflation and are convinced that inflation pressures will eventually fade and return to the 2% target. But, as we have seen, predicting inflation can be a stupid errand – especially in this economic climate. Everyone’s eyes will see on MPC how it copes with this ever-changing situation.”
“While its step-by-step and cautious approach is important and to some extent, we also need to take decisive actions to protect the economy and support the main drivers of economic growth, such as the real estate market.”
“Now note the announcement of the Prime Minister at noon, hoping that any potential spending cuts or further tax increases will not ultimately exacerbate inflationary pressures.”
“We’ve seen some positive news around the extra funding of affordable housing – hopefully she can squeeze some support to make more people buy.”
