LONDON – Britain’s annual inflation rate fell less than expected in March, according to official data on April 17 that could cloud the outlook for interest rate cuts and cause more pain for the government.
The Consumer Prices Index dropped to 3.2 per cent in March, the lowest level since September 2021, the Office for National Statistics (ONS) said.
Markets, however, had expected a rate of 3.1 per cent in March.
Inflation rose 3.4 per cent in the 12 months to February, the ONS added in a statement.
“Inflation eased slightly in March to its lowest annual rate for two-and-a-half years,” ONS chief economist Grant Fitzner said.
“Once again, food prices were the main reason for the fall, with prices rising by less than we saw a year ago.
“Similarly to last month, we saw a partial offset from rising fuel prices,” he added in the ONS release.
Finance minister Jeremy Hunt described the latest drop as “welcome news”.
But inflation remains well above the Bank of England’s 2 per cent target, as millions of Britons wait to see when it will start cutting interest rates to ease a cost-of-living crisis.
Ms Ruth Gregory, deputy chief UK economist at Capital Economics, said the smaller-than-expected fall “raises the risk that inflation will follow the trend in the US and soon stall.
“The chances of interest rates being cut for the first time in June are now a bit slimmer,” she noted.
Other analysts said a June cut remained a strong possibility.
