UK inflation has fallen to its lowest level in two and a half years, as price pressures continue to ease.
The consumer prices index dropped to 3.2% in March, the lowest since September 2021, down from 3.4% in February.
The annual rate is slightly higher than City economists expected (they had pencilled in a drop to 3.1%).
It brings inflation further towards the UK’s 2% target, and away from the 40-year peak of more than 11% in the autumn of 2022.
But although inflation has fallen, prices are still rising compared with last year – just at a slower rate.
It means real wages are still rising, as regular pay grew by 6% a year in the three months to February.
Economists expect a further decline in inflation in April, with the potential to fall below the Bank’s 2% target after a sharp drop in household gas and electricity bills to the lowest level for two years.
The largest downward contribution to the monthly change in UK inflation came from food, with prices rising by less than a year ago, the Office for National Statistics said.
Core UK inflation has also fallen.
The ONS reports that CPI (excluding energy, food, alcohol and tobacco) rose by 4.2% in the 12 months to March 2024, down from 4.5% in February.
Goods price inflation fell to 0.8%, from 1.1%. But services inflation was higher – it only eased slightly from 6.1% to 6%.
Prices for food and non-alcoholic beverages rose by 4% in the year to March 2024, down from 5% in February. The March figure is the lowest annual rate since November 2021, the ONS reports.
The price of petrol rose by 2.6p a litre in March, today’s inflation report shows, to an average of 144.8p. That is still lower than a year ago, when it was 146.8p.
Diesel prices rose by 2.8p a litre in March to 154.1p a litre, down from 166.5p a litre in March 2023.
These movements resulted in overall motor fuel prices falling by 3.7% in the year to March 2024, compared with a fall of 6.5% in February.
The agenda • 9.30am BST: UK house price and rental costs data • 10am BST: eurozone inflation report for March (final estimate) • 2pm BST: IMF to release its latest fiscal monitor report
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