U.K. Inflation Slows, Offering Some Relief Ahead of Spring Statement

U.K. inflation rose less than expected in February, easing some pressure on Chancellor Rachel Reeves as she prepares to deliver her Spring Statement to Parliament.

Key Inflation Figures:

• Annual CPI: +2.8% (vs. 3.0% expected, down from 3.0% in January)
• Monthly CPI: +0.4% (vs. 0.5% expected, following -0.1% in January)
• Core CPI: +3.5% YoY (down from 3.7% in January)

While inflation is moderating, it remains above the Bank of England’s 2.0% target, keeping interest rate policy under scrutiny.

Economic & Policy Implications:

• Reeves’ Spring Statement is expected to expand welfare and government department cuts, following last week’s welfare spending reduction announcement.
• £2.2 billion in additional defence spending is expected, reflecting Europe’s focus on regional security.
• The Bank of England recently halved its growth forecast but maintained its 4.5% key interest rate, citing heightened uncertainty from global trade tensions and U.S.-EU tariff disputes.

Outlook:

• Slower inflation offers a small reprieve but is unlikely to alter the Bank of England’s cautious stance.
• Markets will watch closely for fiscal policy updates in Reeves’ statement and any further revisions to economic growth forecasts by the Office for Budget Responsibility.