However, there was less cheerful news for British homeowners, with the average price of a house rising at its slowest rate since July 2013, up 2.7 percent on the year.
House prices in London have declined on the year for seven of the last eight months -- the longest run of falls since the last recession -- as the country's capital feels the effect of higher purchase taxes and investor uncertainty ahead of Brexit.
The biggest monthly fall in petrol prices in more than three years was the biggest driver of slower consumer price inflation, reflecting a sharp fall in the cost of a barrel of oil. A drop in volatile video games prices also pushed down on inflation, but this was more than offset by higher tobacco taxes.
British consumers have been pressured by inflation since June 2016's Brexit referendum triggered a fall in sterling of more than 10 percent against the dollar and euro. A year ago, inflation peaked at a five-year high of 3.1 percent.
But despite the fall in inflation since, and a pick-up in headline wage growth to its highest in a decade, businesses have reported a downturn in consumer spending in recent months.
The British Chambers of Commerce forecast on Tuesday that economic growth this year and next would be the slowest since the country was last in recession in 2009.
If Britain leaves the European Union as scheduled on March 29, without securing any transition deal to preserve trade ties, the outcome could be significantly worse, economists say.