The unexpected fall could give Rachel Reeves a modicum of comfort as she faces her first Spring Statement speech and was just below economists’ predictions.

New predictions from the Office for Budget Responsibility (OBR) show inflation will hit a peak of 3.8% in July, then not returning to the 2% target until at least Q2 of 2026.

Clothing and housing costs were the big downward drivers, while alcohol and tobacco prices rose across the board. Going out for dinner or staying in a hotel also increased in February, however minutely at just 0.1% more than January.

Fuel prices were not included in this month’s data as ‘checks are carried out on the dataset’ said the Office for National Statistics (ONS). This includes ‘changes in the prices of goods bought and sold by UK manufacturers, including price indices of materials and fuels purchased (input prices) and factory gate prices (output prices)’, said the ONS.

The price of clothing fell by 0.3% in February, the opposite of this time last year when the cost of clothing rose by 2.1%. This is the first time this category has fallen since January 2021. Children’s clothing was the largest contributing factor here, followed by women’s clothing, said the ONS.

But there is still concern about the inflation risks, stagnant growth and lack of movement on Bank of England base rates.

Lindsay James, investment strategist at Quilter said: ‘There is a cocktail of risks right now for the UK when it comes to inflation, and this is only adding to the “stagflationary” fears.

‘Economic growth is miniscule and risks going backwards, but should inflation continue to refuse to get back near the 2% target, it is difficult to see what the Bank of England can do with interest rates.’

Although the ONS said there ‘were no large, offsetting upward contribution’, the price of alcohol and tobacco rose by 5.7%, influenced by the increase in duty on non-draught alcohol which came in from 1 February 2025.

A ‘further large decline’ which influenced the dip was the cost of Housing and household services, increasing by just 0.3% in February 2025, half that of 2024.

Housing prices continued to rise in February as well, however at a lower rate than in January. Prices rose by 0.3%, half that of February 2024. On top of this the cost of renting rose by 7.4% in the 12 months to February 2025, although high this is lower than January when it was at 7.8%.

Richard Harrison, head of mortgages at Atom bank said: ‘The increase reported by the ONS - the highest rate of annual growth since February 2023 - is a great snapshot of the start of this year, with buyers moving quickly out of the blocks in the race to beat the upcoming stamp duty deadline.

‘Cheaper mortgage rates are playing their part too. Moneyfacts reported significant momentum in rate falls across February, with two and five-year fixes dropping at the fastest pace in six months. With inflation coming in lower than expected, and the markets now predicting there will be two further base rate cuts this year - potentially from as soon as May - the prospect of mortgage rates heading below 4% will buoy buyers.’

There may have been an unexpected drop in inflation in February, but it may not last very long as April price increases are on the horizon.

Danni Hewson, head of financial analysis at AJ Bell said: ‘This dip in inflation was slightly deeper than had been expected by economists, but it’s hard to get excited about one month’s data when we’re all hyper aware that things are about to get more difficult once again.’