Latest data from the Office of National Statistics (ONS) has shown that inflation fell slightly to 2.8% in February down from 3% in January.
Core Inflation came in at 3.5% in the 12 months to February, down from the 3.7% in January and lower than forecast.
ONS Chief Economist Grant Fitzner said “Inflation eased in February. Clothing prices, particularly for women’s clothes, was the biggest driver for this month’s fall. This was only partially offset by small increases, for example, from alcoholic drinks.”
Paul Noble, CEO of Chetwood Bank, said “Today’s inflation data will feel like a balm to those stung by recent results. While economic uncertainty persists, fuelled in no small part by current events, today’s result offers hope that inflationary pressures might be easing – if only for a moment.
“After a first Budget that left a significant mark, the Chancellor now faces another pivotal moment. The new government’s balancing act remains delicate, but today’s figures provide some breathing room ahead of the Spring Statement later today. The Bank of England, too, will be watching closely as it weighs the timing of future rate cuts.
“With the question of further interest rate cuts playing out over the coming months, consumers must act now to secure the best savings returns. Financial institutions have a key role to play in ensuring that savers can access competitive and meaningful options no matter what the central bank decides.”
Neil Rudge, Chief Banking Officer, Commercial at Shawbrook said “Lower inflation may offer some relief for SMEs, but it doesn’t remove the bigger challenges they face. With today’s Spring Forecast, businesses will be looking to the Chancellor for tangible support to boost growth and confidence. Falling GDP, rising costs and trade uncertainty continue to make for a tough business climate. While lower inflation strengthens the case for rate cuts, it’s unclear how the Bank of England will respond.
“Our research shows over a third of SMEs are calling for tax cuts to revive the economy—a clear sign they want stronger government support. The newly formed Board of Trade, which advises on trade policy and promotes UK exports, along with the government’s review of SME access to finance, could help unlock new opportunities. Making it easier for businesses to secure funding is vital for innovation, expansion and long-term resilience. In this environment, reliable funding remains essential, giving businesses the financial stability to plan ahead with confidence.
“Curbing everyone’s enthusiasm, inflation coming down should be good news, but it is really the natural consequence of a slowing economy. Lower prices in clothing and household services really reflect more reserved consumers. The silver lining is that this should give the Bank of England some room to rethink its recent hawkish stance and pay more attention to sluggish economic growth. Currently markets price in roughly two rate cuts this year, but we think that, given the overall economic picture, rate risks are to the downside. Faster rate cuts than currently anticipated could at least mean some good news for consumers going forward.”
Anna Leach, Chief Economist at the Institute of Directors, said “Inflation has come in a little lower than expected, with services inflation holding steady at 5.0% while goods inflation dropped to 0.8%. Clothing and footwear exerted the only dampening pressure on inflation as prices fell for the first time since October 2021.
“Inflation is expected to be fairly steady for a further month, before lifting sharply with the OfGem price cap. But gas prices are already 25% below their February peak which, if sustained, should drive down the energy price contribution to inflation later in the year. And a soft economy may also apply further downward pressure. Other pipeline inflationary pressures remain elevated however, particularly from wage growth, which has yet to come down substantively, and from the passthrough of costs from the Autumn Budget. Meanwhile, the outlook for tariffs will continue to inject uncertainty into global pricing patterns for the foreseeable future.
“With the balance of inflationary pressures pretty stable at an elevated level in the near-term, there remains limited space for interest rates to fall this year. For the Chancellor, debt interest payments will continue to constrain the public purse, meaning every other penny of government spending will need to work that bit harder to deliver savings and productivity improvements, both for the public sector and the broader economy.”
John Phillips, CEO of Just Mortgages and Spicerhaart, said “Some good news on inflation will be welcomed by the Chancellor as she prepares to deliver her Spring Statement today. However, it looks like it could be just a blip as the government’s policy on national insurance and other tax hikes will soon filter into the equation. That’s on top of changes to energy prices and council tax also due soon, as well as any further geopolitical escalation we could see.
“Economists suggest September as the peak for inflation and remain confident that inflationary pressures will eventually subside and return to the 2% target. As we’ve seen though, predicting inflation can be a fool’s errand – particularly in this economic climate. All eyes will be on the MPC to see how it responds to this changing picture. While its gradual and careful approach is important and works to a point, we also need decisive action to safeguard the economy and support the key drivers of economic growth – such as the property market.
“Attention now turns to the Chancellor’s announcement at midday, with hopes that any potential spending cuts or further tax rises don’t end up fuelling inflationary pressures. We’ve already seen some positive news around additional funding for affordable housing – let’s hope she is able to squeeze in some support to enable more people to buy.”
Matt Hartley, Director of Engagement at the Money Advice Trust said “Despite this small fall, inflation remains unwaveringly above target – and we are just a week away from significant increases in council tax, utility and other household bills.
“With 7 million people already behind on at least one household bill ahead of next week’s price hike, there is little sign of respite for many across the country.
“The government must take action to help households cope with these high costs, including on energy bills through introducing a social tariff, and investing in council tax support.”