Yesterday, we discovered that the energy cap will drop by £300 from April, from £1,928 a year to £1,620 for a dual-fuel contract paid by direct debit. It will be followed by another drop of more than £120 when the energy cap is revised downwards again in July.

Combined, these two reductions will knock more than £430 off the average gas and electricity bill by the summer, reducing it to less than £1,500 a year.

And that’s only the start.

Last week’s shock figure showing inflation jumped to four percent in December is increasingly looking like a blip.

Analysts at Dutch bank ING reckon headline UK inflation is on course to fall below the Bank of England’s target of two percent in April.

The UK imports a relatively high proportion of its gas and electricity, so has been hit harder than most by the energy shock. But this will now work in our favour as inflation falls faster.

Consumer price inflation will slide even lower in May, to a meagre 1.5 percent, according to ING, and hold below two percent all the way through to November.

While it’s one of the more optimistic predictions, other forecaster are plotting a similar trajectory for interest rates.

And that’s not all.

Yesterday, the EY Item Club has upgraded its outlook for UK growth in 2024, in what it declared a “turning point” for our stagnating economy.

Falling inflation, interest rate cuts and tax reductions will make most people feel notably better off than we do today. That includes pensioners, as the state pension will increase by 8.5 percent in April thanks to the triple lock, which could be more than four times the inflation rate at that point.

It’s been a long time coming, that’s for sure.

This will be a boon for homeowners, as EY reckons the BoE is likely to cut base rates from today’s 5.25 percent to just four percent by year end. 

Mortgages have already started falling in anticipation, with best buy deals now starting at just over four percent at lower loan-to-values.

That trend now looks set to accelerate. 

In more good news, Chancellor Jeremy Hunt is said to be lining up more than £10billion worth of tax cuts in his upcoming Budget on March 6. 

These will follow his decision to slash 2p off National Insurance from January 6, and put yet more money into hard-pressed taxpayers’ pockets.

Voters won’t forget that Hunt and Prime Minister Rishi Sunak are to blame for driving taxes to a 70-year high. But they may look a little more kindly on the embattled Tories once living standards start to improve.

We’re not out of the woods yet, though. 

Some 50,000 UK businesses risk are on the “edge of collapse” as they struggle to service their debts, according to insolvency specialist Begbies Traynor.

If Houthi terrorists rebels continue to target Western shipping in the Red Sea, that could push up prices and hit economic growth.

READ MORE: Martin Lewis’s letter to Hunt in full – five requests ahead of Spring Budget

The final obstacle is the Bank of England. If it holds interest rates too high for too long, the agony of higher borrowing costs will destroy more households. 

The moment inflation heads back towards its two percent target, the BoE needs to start cutting rates, fast. Possibly as early as April.

Otherwise it will be making yet another damaging error.

An early interest rate cut would ease some of the pressure on businesses that are struggling to service their debts, and be a tonic for the housing market, too.

We’re heading in the right direction. The BoE mustn’t derail the recovery or worse, drive us into a needless recession.

The upturn will come as a huge relief, although Labour leader Kier Starmer may have mixed feelings as the election looms.