UK inflation unexpectedly fell to 2.8 per cent in February, in a boost to chancellor Rachel Reeves as she prepares to deliver a high-stakes Spring Statement.
The annual increase in consumer prices, reported by the Office for National Statistics on Wednesday, was below the 2.9 per cent forecast by economists polled by Reuters and the 3 per cent recorded in January.
The decline was driven by a fall in clothing prices, which dropped 0.6 per cent in the 12 months to February.
The figure comes as Reeves is set to outline more than £10bn of spending cuts in an attempt to repair a hole in the public finances caused by anaemic growth and higher borrowing costs.
Persistent price pressures have prompted the Bank of England to take a “gradual” approach to cutting interest rates despite lacklustre growth. Last week it held rates at 4.5 per cent.
Services inflation, a key measure of underlying price pressures for rate-setters, held at 5 per cent in February, according to the ONS. Economists had predicted a decline to 4.9 per cent.
Joe Nellis, economic adviser at MHA, the accountancy firm, said the drop in headline inflation was “a welcome surprise for the government ahead of the Spring Statement, yet it is unlikely to undo the shift towards caution in the rate-cutting strategy of the Bank of England that has taken place in recent months”.
Following the release of the figures, the pound weakened 0.2 per cent to $1.292.
