Inflation in the UK fell to 1.7% in February according to the Consumer Prices Index, easing pressure on living standards and dropping below the Bank of England’s target.
It marks the second consecutive month that a drop has occurred, with the figure at 1.9% in January, and a fall in petrol prices has been identified as the key reason for this latest drop.
The Office for National Statistics said that prices for petrol fell 0.8p per litre between January and February – compared to the same period in 2013 when they rose 4p.
Inflation measured by the Retail Prices Index also dropped from 2.8% to 2.7% in the two months at the start of 2014.
In addition, the price of clothing and footwear has increased at a slower pace than in the past, assisting in the inflation rate fall.
January was the first time in more than four years that inflation was below the Bank of England’s 2% target, meaning February marks a further low point for rates.
Growing spending potential
The gap between inflation and wage growth is also closing, and it now at its narrowest since April 2010, according to the ONS.
Up until December, inflation was gradually eroding away the spending power of UK households, heaping pressure on families, although the situation is taking a turn for the better.
The BoE is in no rush to alter interest rates and is keeping a close eye on unemployment in a bid to ensure any changes are not made too quickly.
House prices are also growing at a rapid rate, with the 6.8% increase seen between January and February the highest rise since August 2010.
Increases were concentrated in London, with prices in the capital up by 13.2% while the falling inflation rates open up the possibility of greater spending power.
Taking care when spending
However, there remains a need to be careful with personal finances, especially in a situation where some doubts remain over the state of the recovery.
Financial management is extremely important so keeping spending in check with a prepaid card is a great way of ensuring you don’t spend more than you would like.
A prepaid card limits spending to the amount on the card at any given moment and is not directly linked to a bank account, ultimately making your funds safer.
The cards can easily be topped up or replaced if required, while accounts can be checked regularly online if needed.