The disappointing retail data adds to the dim economic picture in the U.K. and to the challenges facing Finance Minister Rachel Reeves.

The Bank of England will cut interest rates four times this year to support a flat-lining economy, economists polled by Reuters said, but they added that risks to inflation are to the upside, suggesting policymakers may end up doing less.

The fall in the headline rate of inflation from 2.6 percent to 2.5 percent was unexpected and positive news for the Chancellor Rachel Reeves.

Alan Taylor, the most recently appointed member of the Bank's monetary policy committee (MPC) said the UK is 'in the last half mile on inflation' and called for a pre-emptive cut

The UK economy faces mounting uncertainty as discussions intensify around potential changes to monetary policy. Speculation is growing that the Bank of England may take decisive action in the months ahead to address evolving economic challenges.

Inflation worries eased on both sides of the Atlantic, boosting markets and providing respite to beleaguered Chancellor Rachel Reeves (pictured).