In February official figures showed Consumer Prices Index (CPI) inflation fell to 3.4% from 4% in January.
This is now the lowest level since September 2021 boosting hopes that the Bank of England could lower interest rates.
The Chancellor said on Wednesday that this “decisive” fall could allow him to reduce national insurance.
Jeremy Hunt said: “Inflation has not just fallen decisively but is forecast to hit the 2% target within months.
“This sets the scene for better economic conditions which could allow further progress on our ambition to boost growth and make work pay by bringing down national insurance as we work towards abolishing the double tax on work.”
The Chancellor told broadcasters: “As inflation gets closer to its target, that opens the door for the Bank of England to consider bringing down interest rates, that brings down mortgage rates, that makes a very big difference.
“It’s far too early to know whether we’ll have another fiscal event before the election, but what I would say is that what you can see is the difficult decisions the Government has taken over the last year are paying off.”
James Smith, an economist at ING, said: “A 12% fall in household energy bills due in just under two weeks should take headline inflation below 2% in either April or May.
“It’s likely to stay below the Bank of England’s target for much of 2024, especially when you consider we may well see another double-digit percentage point fall in energy bills in July when the regulator again updates the household price cap.”
