Inflation came in at 3.2% in March, declining from the 3.4% reported in February.
Measured by the consumer prices index (CPI), though slightly higher than forecasts (3.1%), it is heading slowly towards the Bank of England’s 2% target.
The largest downward contribution to the monthly change came from food, with prices rising by less than a year ago, while the largest, partially offsetting, upward contribution came from motor fuels, with prices rising this year but falling a year ago.
Meanwhile, core inflation, which takes out volatile factors like energy, food, alcohol and tobacco to give a clear picture of underlying trends, came in at 4.2% in the 12 months to March 2024, down from 4.5% in February.
Alpesh Paleja, CBI Lead Economist, said: “While March’s fall in inflation was smaller than expected, it’s still likely to move closer to the Bank of England’s 2% target in the next few months. But the path beyond this will be bumpy – the CPI rate is likely to rise again in the second half of 2024, thanks to base effects from energy prices.
“The Bank of England will look through these ups and downs, so it’s still likely that they will cut interest rates this summer. But it’s notable that inflation is now higher than the Bank expected, and in view of this they will also be keeping one eye on the resilience in pay growth. Recent developments in the Middle East could also slow the path of inflation back down, if they feed through to higher global energy prices.
“Therefore, while it’s reasonable to expect some loosening in monetary policy ahead, this is by no means a done deal.”
