Responding to yesterday’s ONS inflation drop announcement, Thiru said, “This sizable slowdown suggests that the struggle against soaring prices took a decisive turn for the better in January as lower airfares, petrol and food costs helped haul inflation nearer to more normal levels.”

The easing of inflation offers relief for households and signals improving economic conditions. A reduction in interest rates in the spring would help ease financial pressures further and boost business confidence.

Thiru notes that underlying indicators are moving in the right direction. “Slowing services and core inflation will provide some reassurance for rate-setters that underlying price pressures are becoming less stubborn, and the squeeze on demand in the economy from higher unemployment and weaker wage growth should keep it on a downward trajectory.

“January’s decline kicks off a dramatic descent for inflation with falling food prices and lower energy bills – helped by the Chancellor’s cut to green levies and April’s expected energy price cap reduction – pulling it back to 2% in the spring.”

With inflation now firmly on a downward path, the prospect of a spring interest rate cut appears increasingly likely. Thiru says, “These figures make a spring interest rate cut look almost assured, though a lingering question among policymakers will be whether to pull the trigger in March or April as some may want slightly more evidence of easing inflation before reducing rates.”