Boost for Rachel Reeves as inflation falls to 2.5%: Live

Inflation has fallen to 2.5 per cent in a boost for Chancellor Rachel Reeves as she refused to rule out the possibility of an emergency budget.

The Consumer Prices Index (CPI) figure is still above the Bank of England’s 2 per cent target, but is lower than November’s 2.6 per cent.

It means that the central bank is less likely to want to rapidly bring down interest rates, meaning higher costs for borrowers but better rates for savers.

Asked in Parliament if she could rule out tax rises and spending cuts in an emergency Budget, Reeves instead recommitted to the borrowing rules announced in October.

“We have committed to have just one budget per year to provide businesses with the certainty that they need to invest, so we will have an update from the OBR in March,” she said.

“We have set out the fiscal rules that we will balance day to day spending with tax receipts and we will get debt down as a share of GDP within the forecast period, and we will continue at all times to meet those fiscal rules.”