UK inflation for February was lower than predicted following a peak in January, providing a boost ahead of Chancellor Rachel Reeves’ Spring Statement. The 2.8% year-on-year increase was driven mainly by a 0.6% decline in clothing and footwear costs. Retailers are focusing on affordability by offering more discounts, price matching, and promotions.

In February, prices rose by 0.4% compared to the previous month. Food and alcohol expenses saw a 3.3% increase from last year. The core consumer price index, excluding food and energy, rose by 3.5% year-on-year in February, down from 3.7%.

Despite the slight decrease in inflation, there are concerns that inflation may rise in the near future due to factors like the upcoming increase in the energy price cap in April. The Bank of England predicts inflation to peak at 3.7% later this year. The situation has raised worries of 'stagflation,' with minimal economic growth and persistent inflation. Services inflation, particularly in the UK, remains high, with the annual rate steady at 5.0% in February.

As the Bank of England contemplates possible rate changes, a significant decrease in services CPI would be necessary to instill confidence in reducing rates later in the year.