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UK inflation cools further, but remains above target

The UK’s annual inflation rate edged down to 3.2% in March from 3.4% in February, according to the Office for National Statistics (ONS). While moderating, the figure exceeded expectations of a 3.1% print. A key …

The UK’s annual inflation rate edged down to 3.2% in March from 3.4% in February, according to the Office for National Statistics (ONS). While moderating, the figure exceeded expectations of a 3.1% print.

A key driver behind the latest easing was a slowdown in food price growth. The ONS stated that prices for food and non-alcoholic beverages rose by 4.0% annually in March, down from 5.0% in February – the lowest rate since November 2021.

On a monthly basis, consumer prices climbed 0.6% in March, matching the increase seen in February. Core inflation, which excludes volatile energy, food, alcohol, and tobacco components, fell to 4.2% from 4.5% previously, though still above the 4.1% consensus forecast.

The moderation in March brings the headline inflation rate closer to the Bank of England’s 2% target, ahead of the central bank’s next interest rate decision on May 9.

Producer prices, meanwhile, continued to decline at a faster pace year-on-year last month. Input prices fell 2.5% annually in March, following a 2.2% drop in February. On a monthly basis, they edged 0.1% lower after rising 0.3% in the prior month.

Nicholas Hyett, Investment Manager at Wealth Club, commented on the data: “UK inflation is firmly in the slow puncture phase, and has been since the last quarter of 2023. Big falls are now a thing of the past, and unless there are some major external shocks – such as a spike in global energy and food prices – it seems likely to stay that way. Put that together with an economy which is showing some signs of weakness, and the evidence to support an interest rate cut is growing.”


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