The annual inflation rate in the UK fell to 2.8% in February 2025 from 3% in January, coming in below market expectations of 2.9%, though aligning with the Bank of England's forecast.
UK annual inflation cools down in February
This marks the lowest inflation rate since July 2021, reflecting a continued downward trend as price pressures ease across several sectors. The most significant downward contribution came from clothing prices, which declined for the first time since October 2021 (-0.6% vs 1.8%), driven by lower prices for women’s and children’s garments.
Inflation also slowed in recreation and culture (3.4% vs. 3.8%), particularly due to lower costs for live music admission and recording media, as well as in housing and utilities (1.9% vs. 2.1%), where actual rents for housing grew at a slower pace (7.4% vs. 7.8%). On the other hand, food inflation remained unchanged at 3.3%, while price growth accelerated in transport (1.8% vs. 1.7%) and restaurants and hotels (3.4% vs. 3.3%), reflecting persistent cost pressures in these sectors. Meanwhile, services inflation remained steady at 5%, highlighting ongoing price stickiness in this area.
Core inflation also slows
The annual core inflation rate, which excludes volatile items like food and energy, eased to 3.5% from 3.7%, suggesting a broader cooling of inflationary pressures. On a monthly basis, the Consumer Price Index (CPI) rose by 0.4%, rebounding from a 0.1% decline in January, though slightly below market forecasts of a 0.5% increase. The data reinforces expectations that the Bank of England may consider interest rate adjustments later in the year as inflation moves closer to its 2% target.
