THE UK’s rate of inflation fell again in March.
The Office for National Statistics (ONS) said the Consumer Price Index (CPI) measured 2.6% in the 12 months to March.
March’s figure is below economists’ expectations and should bring fresh hope about an interest rate cut next month.
The prior month’s inflation hit 2.8% and in January, it sat at 3%.
Officials said a drop in fuel prices helped inflation edge down, and food prices remaining the same.
This was only offset by the rising cost of clothing items for shoppers.
Inflation is a measure of how much the prices of everyday goods such as food and clothes, and services such as train tickets and haircuts, have increased compared to a year earlier.
When inflation falls it means prices are going up at a slower pace than the month before.
The Bank of England has a target to keep inflation at 2%.
Meanwhile, inflation is expected to hit 3.7% in the summer, driven by increases in the price of energy and food.
It comes just one day after the ONS published its latest labour market data, with wages remaining high.
The Bank of England will look at today’s inflation data and wages when making a decision about whether to hold or cut interest rates.
[bc_video account_id=”5067014667001″ application_id=”” aspect_ratio=”16:9″ autoplay=”” caption=”Understanding GDP and Its Impact on the Economy” embed=”in-page” experience_id=”” height=”100%” language_detection=”” max_height=”360px” max_width=”640px” min_width=”0px” mute=”” padding_top=”56%” picture_in_picture=”” player_id=”default” playlist_id=”” playsinline=”” sizing=”responsive” video_id=”6355832489112″ video_ids=”” width=”640px”]Most economists are predicting that the rate will be cut on May 8, down from its current figure of 4.5%.
Chancellor of the Exchequer, Rachel Reeves, said inflation falling for two months in a row and wages growing faster was “positive” but there was “more to be done”.
“I know many families are still struggling with the cost of living and this is an anxious time because of a changing world. “
She added: “That is why the Government has boosted pay for three million people by increasing the minimum wage, frozen fuel duty and begun rolling out free breakfast clubs in primary schools.”
WHAT IT MEANS FOR YOUR MONEY
Falling inflation is generally good news for households.
Many will now be pinning their hopes on a rate cut from the central banks, in hopes it could lower interest on mortgage deals.
[boxout headline=”REEVES NOT OUT OF THE WOODS YET”]By Noa Hoffman
RACHEL Reeves just received a rare bit of good news — inflation has dipped to 2.6 per cent, the lowest in over two years.
It’s a tiny win the Chancellor will want to shout about as she battles to prove she’s got a grip on Britain’s battered economy.
Steadying price rises mean there’s finally a bit more breathing room for families squeezed by years of soaring bills and sky-high interest rates.
It’s also a big green flag for the Bank of England, with homeowners and analysts hoping it could trigger a long-awaited interest rate cut next month.
But Ms Reeves can’t start popping champagne just yet, because storm clouds are already gathering on the horizon.
Experts warn inflation could shoot back up to 3.7 per cent by Autumn, thanks to rising energy prices and global uncertainty.
The labor market is also showing signs of weakening, with a drop of 78,000 pay-rolled employees in March and vacancies falling below pre-pandemic levels.
Meanwhile, global trade tensions continue to simmer.
Even if the UK managed to strike a bumper deal with the US – the knock-on impact from countries that do not meet Donald Trump’s demands mean conditions for growth will be far tougher.
So while the Chancellor can enjoy a small win today, the real fight to fix the economy is only just heating up.
Lenders use the base rate to determine the interest rates offered to customers on savings and borrowing costs, including mortgages.
Nicholas Mendes, mortgage technical manager at John Charcol, said the Bank’s next move will depend on whether this latest dip in inflation is seen as the “beginning of a longer-term trend or merely a temporary pause”.
“For mortgage borrowers, today’s figure is certainly a positive development but it’s too early to say the tide has turned.”
[authenticated-scripts src=”%3Cscript%20class%3D%22palin-poll%22%20src%3D%22https%3A%2F%2Fwww.thesun.co.uk%2Fpollingwidgets%2Fv3%2Fwidget.js%3Fquestion_id%3D112493%26game%3Dpolling%22%3E%3C%2Fscript%3E” type=”embedded” width=”100″ /]If the bank slashes rates like expected, it could also mean that savers earn less interest on money they deposit.
Paul Went, head of savings at Shawbrook Bank, said: “In an environment where rates may begin to fall, fixed rate accounts can provide certainty – and specialist banks, often overlooked, remain one of the best-kept secrets for competitive, tax-efficient returns.”
Elsewhere, Suren Thiru, economics director at ICAEW, said today’s drop was only a “temporary reprieve”.
He explained: “March’s inflation drop is only a temporary reprieve as a hefty increase is nailed on for April, with rising energy bills and surging business costs, including higher national insurance, likely to lift inflation to around 3.5%.”
Brits saw a rise in a number of bills this month, including energy, council tax, water and broadband.
Suren added: “While services inflation remains strong, loosening labour market conditions and a flagging economy should eventually put it on a downward trajectory, despite the likely upward momentum from the national living wage increase. ”