UK inflation slowed to 2.8% in February, fuelling hopes of a rate cut

UK inflation came in lower than expected in February, following a 10-month peak in January, raising morale before Chancellor Rachel Reeves’ Spring Statement, due later on Wednesday. 

UK prices rose by 2.8% year-on-year, following a 3% reading in January, mainly driven down by costs sliding 0.6% for clothing and footwear. 

“Retailers are intensifying their focus on affordability in their shopper communications, responding to mounting inflationary pressures with increased discounting, price matching, and promotions on private brands,” Pieter Reynders, Partner at McKinsey & Company, commented.

In a monthly comparison, prices rose by 0.4% in February, following a 0.6% increase in the previous month. 

The cost of food and alcoholic beverages jumped by 3.3% compared to last year. 

The core consumer price index, calculated without food and energy prices, rose by 3.5% in the 12 months to February 2025, down from 3.7%.

“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,” commented Sarah Coles, head of personal finance at Hargreaves Lansdown.

Coles expects inflation to lift again next month and then keep rising in April, when the energy price cap is forecast to go up to its highest level since the beginning of last year. 

“This is on top of rises in everything from water bills – up £123 on average - to council tax – up an average of £109. The Bank of England is expecting inflation to peak at 3.7% later this year," she said.

Lindsay James, investment strategist at Quilter, added: “There is a cocktail of risks right now for the UK when it comes to inflation, and this is only adding to the