Inflation has dipped to a new, four-year low, easing the pressure on the Bank of England to raise interest rates and increasing the likelihood of real wages turning positive in the coming months.
The annual rate of consumer price inflation declined to 1.7 per cent in February, according to the Office for National Statistics (ONS). That is down from 1.9 per cent the previous month and the lowest rate of price rises since October 2009
"The continued benign inflationary conditions are supportive of a dovish MPC [Monetary Policy Committee] meaning it is still likely that the first hike will not occur before the third quarter of 2015 despite the strengthening labour market," said Simon Wells of HSBC.
Real wages have been in decline since the financial crisis, with pay rises lagging behind prices over the past five years.
In the three months to January, pay across the economy rose 1.4 per cent while inflation over that period eased to 1.9 per cent.
"There is now a distinct possibility that real wage growth will hit positive territory in April, helping to support household spending," said Martin Beck, economic adviser to the EY Item Club.
The MPC has stated that it will keep rates at their record low of 0.5 per cent so long as there remains a margin of slack in the economy. Financial markets expect the first rate rise to come in the second quarter of next year, around the same time as the general election.
The Bank's official target is to keep inflation at 2 per cent over its forecast horizon. The Bank's most-recent forecasts from February showed inflation dipping to an average of 1.8 per cent this quarter, before rising back up to 2 per cent in the middle of the year.
The ONS said that the largest contribution to the fall in consumer price inflation had come from transport, which increased 0.3 per cent between January and February following a 1.2 per cent rise in the two months a year earlier. There was also downward pressure on the annual inflation rate from clothing and footwear.
Factory-gate inflation also slowed in February, rising by 0.5 per cent in the year to February, down from 0.9 per cent in the year to January and suggesting subdued price pressures down the line.
However, core consumer inflation in February, which strips out volatile items such as food and energy, crept up to 1.7 per cent, from 1.6 per cent previously.
Consumer price inflation soared above the Bank's 2 per cent target in the wake of the 2008/2009 recession, peaking at over 5 per cent. It finally fell back to the 2 per cent target in December.
Property boom: Going through the roof
Average house prices are growing at their fastest rate since the autumn of 2010, with London's up more than 13 per cent on a year earlier.
Nationwide said prices rose 6.8 per cent in the year to February, up from 5.5 per cent in December. After the capital, the biggest monthly increases in property values were seen in the South-east and Wales where prices were up 7.1 per cent and 6.9 per cent respectively.
The weakest growth was in the North-east (0.6 per cent) and Scotland (1.4 per cent).