Inflation took a surprise drop to 2.8% in February due to a fall in the cost of clothing, government data reveals.
The Consumer Prices Index (CPI) decreased from 3% in the 12 months up to January 2025, according to the Office for National Statistics (ONS).
Month-to-month, the CPI rose by 0.4% in February, which in 2024 had increased by 0.6%. However, the rate is still above the 2% target the Bank of England set – a level it has not reached since July 2024.
A dip of 0.6% in prices for clothes in February was largely thanks to reductions on women’s clothing items. Prices of children’s clothing dipping also contributed to inflation cooling, particularly on accessories such as hats and scarves, the ONS noted.
This trend for February fashion markdowns is in contrast to the usual behaviours from retailers, as prices normally rise following widespread New Year sales. Indeed, it is the first time since the Covid-19 pandemic that clothing prices have decreased between January and February.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said inflation easing “may be comforting for households”, but the good news might not last so long.
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Haine said: “The unexpected dip in the headline rate may prove to be temporary, only providing short-term relief before ramping up again as the year goes on.
“The main driver behind the dip in the headline rate was a decline in the prices for clothing and footwear, but food inflation held at 3.3% in February – something many expect to worsen in the months ahead as supermarkets grapple with rising costs.”
She added: “Businesses up and down the country have already warned of plans to pass on rising employment costs to their customers to offset the hit from Chancellor Rachel Reeves’ increases in employment taxes, along with the minimum wage – a trend likely to prove inflationary.
“Despite the slight dip in the headline rate in February, it appears stubborn inflation is here to stay.”
The Chancellor will announce her Spring Statement today, with cuts to be announced on welfare benefits.
‘Inflationary pressures might be easing – if only for a moment’
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.”
Peter Stimson, head of product at MPowered Mortgages, said: “Any breather could be temporary, as April will bring an inflationary boost for households in the form of higher council tax bills and for businesses in the form of a surge in the cost of hiring people. April is also likely to see many firms agreeing annual pay rises, in many cases above inflation.
“The inflationary shadow [that] has shrouded the UK economy for the past three years has lightened but not lifted. Things may get worse before they get better. The question now is at what point might cooling inflation prompt the Bank of England to unleash its next base rate cut.”
He added: “While CPI is still well above the bank’s 2% target, economic growth is a major worry. The economy slipped into reverse in January and the OBR is today expected to slash its growth forecast for 2025, so it may take only one more month of easing inflation for the bank to resume its rate-cutting.
“At present, the swap markets are pricing in two more base rate cuts for 2025, but with the economy stagnating, the bank could be tempted to cut faster. A base rate below 4% by Christmas is possible – and this at least will be welcome news for the 1.8 million households due to remortgage this year.”
This article was first published on Mortgage Solutions‘ sister site, YourMoney.com. Read: Discounted clothes drive inflation to surprise ‘temporary’ drop
