Reeves is expected to propose significant savings through benefit reductions and trimming civil service costs, but may only achieve a fraction of the anticipated welfare cuts.

The Trade Union Congress (TUC) highlighted that low growth remains a significant challenge, despite falling inflation, with high interest rates continuing to impact households and businesses negatively.

UK inflation has decreased to 2.8% in February 2025, down from 3% in January, providing a positive outlook for Chancellor Rachel Reeves ahead of her spring statement.

Economists suggest that the recent drop in inflation increases the likelihood of a rate cut by the Bank of England in May 2025, with two more cuts forecasted by the end of the year.

The Office for National Statistics (ONS) reported this drop in inflation on the same day Reeves is set to announce spending cuts across government departments.

The decline in inflation is primarily attributed to a significant drop in the prices of women's clothing and shoes, which were the largest contributors to the overall decrease.

Despite the lower inflation rate, some analysts warn it may be temporary, predicting increases due to rising energy costs and national insurance hikes, potentially pushing inflation close to 4% by summer.

Furthermore, inflation rates are projected to rise in the coming months due to upcoming increases in energy and water bills scheduled for April.

Amid these economic challenges, Chief Secretary to the Treasury Darren Jones emphasized the government's commitment to economic stability and growth, pledging to protect workers' incomes.

Inflation has seen fluctuations recently, having decreased from a peak of over 11% in late 2022, but has gradually increased again since last summer.

Following the inflation data release, the British pound fell by 0.1% against the dollar, reflecting market reactions to the economic outlook.

The Bank of England maintained its key interest rate at 4.5%, citing increased uncertainty in global trade due to U.S. tariffs and EU import taxes.