In response, City analysts are forecasting that interest rates will start coming down at least by March, and have already started to push down the cost of borrowing.
For the 1.5 million households on fixed-rate deals due to come to an end this year, the shock of transitioning to a new one will be less painful than they might have feared a few months ago.
Likewise, companies will be under less pressure from their banks and their lenders, enabling them to invest more. As a general rule, when interest rates come down the economy starts to improve; indeed, that is generally the whole point.
In theory, that should come at precisely the right moment for a general election campaign. With a mix of tax cuts in the spring, falling interest rates, and prices stable in the shops (in the case of a handful of foods, they may actually come down), by the autumn ordinary households should be feeling slightly better off.
The Tories won’t exactly be dusting off the slogan that won Harold Macmillan a third term in the 1950s – “You’ve never had it so good” – but at least they will be able to point to a modest recovery in living standards.
It might not be enough to save Rishi Sunak’s premiership. But it could make the result a lot closer than anyone expected.
Here’s the problem, however. There is absolutely no sign that the Bank of England will cooperate.
At the last MPC meeting, held only a week before the inflation data was made public, three members extraordinarily voted for rates to go up even higher, while the remaining six voted to keep them on hold.
If rates had risen last month, it could have pushed the economy into a full blown recession, forced many families struggling with mortgage repayments into genuine hardship, and pushed companies into completely unnecessary bankruptcy.
As it is, for all the expectations in the City, we still have no real idea when the Bank will start to bring rates down again.
Given the hardline stance of many members of the MPC it could well be several more months. Yet that comes at a time when businesses are clamoring for an early cut.
It would not be hard for the Bank to change the narrative. A few dovish comments from the Governor Andrew Bailey acknowledging that the outlook for inflation had changed, that there was little sign of a wage-price spiral getting out of control, and that it was important to help the economy recover, would confirm that a rate cut was on the way.
