The UK inflation rate, which measures the pace of price rises, was 3% in the year to February as cheaper motor fuel offset the increased cost of clothing and footwear.
The Bank of England, which has a 2% inflation target, had hinted at cutting interest rates this year.
This would be good news for borrowers, as Bank of England rates influence the mortgage rates set by financial institutions.
However, since March, prices for petrol and diesel have jumped significantly to the highest since late 2022, according to the RAC motoring organisation.
When inflation is high, the Bank can raise interest rates to bring it down.
If borrowing is more expensive, people and businesses have less money to spend. People may also be encouraged to save more. In turn, this reduces demand for goods and slows price rises.
But it is a balancing act – increasing borrowing costs risks harming the economy.
Rachel Winter, a partner at wealth management company Killik & Co, told the BBC’s Today programme the outlook for inflation was “possibly not as high” as it had been on Tuesday “because we now feel more optimistic about a deal”.
But she said interest rates are unlikely to go down this year.
