UK Inflation Falls to 2.8% as Clothing Prices Decline

UK inflation eased to 2.8% in February 2025, down from 3% in January, driven primarily by a significant drop in clothing and footwear prices, particularly in women's clothing. This decline was unexpected, as analysts had predicted inflation would stay at 3%. Although this represents a positive development, it remains above the Bank of England's target of 2%, which anticipates a rise to 3.7% later this year due to increasing energy costs. The Office for National Statistics (ONS) noted that discounted clothing played a crucial role in this decrease, alongside small increases in other categories like alcoholic drinks. Looking ahead, almost half of UK businesses are considering price hikes due to upcoming tax increases and adjustments to the National Living Wage, which could exert further inflationary pressure. Experts suggest that while policymakers might be cautious about rate cuts, they are unlikely to act swiftly given that inflation is still significantly above target levels.