Skip to content
Search
AI Powered
Latest Stories

Inflation dips as experts warn of future spikes

UK inflation at 2.8% in Feb 2025 before Rachel Reeves’ budget speech
iStock image

British inflation slowed more than expected in February, bringing some relief to consumers ahead of a likely new pick-up in price growth and to finance minister Rachel Reeves before her budget update speech today (26). However, analysts have warned that it inflation will be pushed again soon due to costs arising from the Budget.

Consumer prices rose by 2.8 per cent in annual terms in February after a 3.0 per cent increase in January, the Office for National Statistics said, as clothing and footwear prices fell for the first time in more than three years.


Economists polled by Reuters had pointed to a reading of 2.9 per cent in February while the Bank of England had expected 2.8 per cent in a set of forecasts published in early February.

Economists warned that rising energy prices will push inflation up again soon.

"February's slowdown is a false dawn as notable near-term price rises are already baked in, with next month's jump in energy bills and national insurance likely to push inflation perilously close to 4% sooner rather than later," Suren Thiru, Economics Director at accountancy body ICAEW, said.

He said the BoE would remain wary about price pressures.

"While a May policy loosening remains on the table, rate setters will want to gauge the effect of April’s major jump in business costs and any measures announced in the Spring Statement before proceeding with another rate cut," Thiru said.

Responding to the latest CPI inflation figures, Kris Hamer, Director of Insight of the British Retail Consortium, said, “Headline inflation fell marginally in February, driven by marginal drops in housing and household services and clothing and footwear entering deflation.

"Despite continued cost pressures, namely energy price volatility, food inflation remained unchanged. There was good news as some dairy products such as milk, cheese and eggs all saw price drops on the month.

"Heavy clothing and footwear discounting continued into February, as fashion sales continue to suffer due to unseasonal weather throughout the month.

“Retail operates on tight margins and it would be impossible to absorb all £5bn of new costs which hit the industry in April.

"Food inflation has jumped significantly in recent months and is forecast to hit 5 per cent by the end of 2025 as a result of the costs arising from the Budget.

"On top of this, retailers are still burdened by an outdated business rates system. It is vital that the government’s reform of business rates doesn’t impose additional costs onto retailers. Reform must leave no shop paying more.”