The economic landscape in the United Kingdom has shifted today, 26th March 2025, with inflation easing more than expected. Official figures from the Office for National Statistics show that the Consumer Prices Index (CPI) inflation fell to 2.8% in February, down from 3% in January. This comes as a boost to Chancellor Rachel Reeves as she prepares to deliver her spring statement, where she is expected to announce spending cuts across government departments.
While the cost of living is still rising for UK households, inflation remains above the Bank of England’s 2% target, but at a significantly slower rate than in recent years. Many economists had forecast a CPI inflation rate of 2.9% for February, making today’s figure a positive surprise.
Impact on Consumers and Pricing
Clothing prices, particularly for women’s clothes, were the biggest driver for this month’s fall in inflation, according to ONS chief economist Grant Fitzner. Overall prices for clothing and footwear fell by 0.6% in the 12 months to February, the first drop since October 2021. Women’s clothes, accessories, and children’s clothing all contributed to bringing down the inflation rate.
Housing inflation, including rents, also slowed in February, as did admission prices for live music. However, alcohol and tobacco prices increased following a tax rise on bottled alcoholic drinks at the beginning of the month.
Rachel Reeves’ Spring Statement
The positive inflation news may be short-lived for the Chancellor, as the Office for Budget Responsibility (OBR) is widely expected to slash its forecast for economic growth. Rachel Reeves is set to deliver her spring statement today around 12:30pm, outlining more than £10 billion of spending cuts to repair a hole in public finances caused by slow growth and higher borrowing costs.
Treasury Chief Secretary Darren Jones stated that the government’s “number one mission is kickstarting growth to raise living standards for working people,” highlighting measures such as freezing fuel duty, protecting the triple lock, and increasing the national living wage by £1,400 a year for full-time workers.
Future Outlook
Despite February’s drop in inflation, experts predict it will likely rise again. According to Capital Economics, inflation will probably exceed 3% in April and reach around 3.5% by September due to rising utility prices, with water bills expected to jump 26% in April.
Core inflation, which excludes food, alcohol, and tobacco, also fell in February to 3.5% from 3.7% in January. However, services inflation, a key indicator of domestic price pressures, remained unchanged at 5%.