Consumer prices in the UK have risen by the lowest rate in two-and-a-half years, the Office for National Statistics said on Wednesday.
The inflation rate for the year to March was 3.2%, down from 3.4% in February, but slightly higher than economists' expectations of 3.1%, suggesting that the road to curbing inflation may be difficult. It shows that there is. Core inflation, which excludes volatile food and energy prices, was 4.2%, down from 4.5% in the previous month.
Economists expect inflation to continue to slow in coming months as household energy bills fall, potentially falling below the Bank of England's 2% target. Overall inflation peaked at 11.1% in October 2022.
The economic downturn has put pressure on central banks to cut interest rates. The latest survey results released this week show that Britain's unemployment rate has risen more than expected.
This will be a “difficult balancing act” for the Bank of England, PwC economist Jake Finney said in a note. He said slowing inflation was putting pressure on central banks to cut interest rates “to get the economy growing again,” but that policymakers likely “have achieved sustainable targets before turning to lower rates.” He said he was seeking “more conclusive evidence.”
The Bank of England kept its key interest rate unchanged at 5.25% for five consecutive meetings last month.
The US Federal Reserve also left interest rates unchanged at its most recent meeting. Two senior Fed officials said this week that the central bank will likely wait longer than initially expected to cut rates, given stubborn inflation data.
Last week, the European Central Bank gave its clearest signal yet that it could cut interest rates at its June policy meeting as the euro zone's inflation slows and the region's economy weakens.
