By the economics correspondent
Inflation in the UK slowed more than expected in March, dropping to 2.6%, as falling petrol prices and lower costs for recreational goods helped ease the pressure on household budgets. The latest figures from the Office for National Statistics (ONS) revealed that the Consumer Prices Index (CPI) fell from 2.8% in February, coming in below economists’ forecasts of 2.7%.
This marks the second consecutive month of falling inflation and represents the lowest rate since December, providing some relief to consumers grappling with the cost-of-living crisis.
Petrol prices pull inflation down
The primary driver behind March’s cooling inflation was a noticeable fall in motor fuel prices, which dropped by 5.3%—the largest monthly decline in four months. According to the ONS, the average price of petrol fell by 1.6p per litre, from 139.1p in February to 137.5p in March. That’s significantly down from the 144.8p per litre recorded in the same month last year.
The price fall in fuel coincided with stabilised food costs and a marked slowdown in inflation in the recreation and culture category, including a sharp dip in the cost of computer games.
Clothing prices rise again
However, not all price categories followed the downward trend. The cost of clothing and footwear rose by 1.1% in March, bouncing back after an unusual drop in February. This uptick was attributed to fewer retailer discounts as many shops scaled back seasonal promotions.
ONS Chief Economist Grant Fitzner commented:
“Inflation eased again in March, driven by a variety of factors including falling fuel prices and unchanged food costs compared with the price rises we saw this time last year. The only significant offset came from the price of clothes, which rose strongly this month.”
Broader measures also show decline
In addition to the CPI, the ONS’s broader measure—the Consumer Prices Index including owner occupiers’ housing costs (CPIH)—also saw a decline, falling from 3.7% in February to 3.4% in March. Meanwhile, the often-cited Retail Prices Index (RPI) fell to 3.2%, down from 3.4%.
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Political and economic reactions
The steeper-than-expected drop is likely to be welcomed by Chancellor Rachel Reeves, who has championed the government’s Plan for Change. Speaking after the release of the figures, she said:
“Inflation falling for two months in a row, wages growing faster than prices, and positive growth figures are encouraging signs that our Plan for Change is working, but there is more to be done.”
The figures also bring inflation closer to the Bank of England’s 2% target, sparking renewed calls for interest rate cuts. With the Bank Rate currently at 4.5%, many analysts expect pressure to mount on the Bank of England to ease monetary policy at its next rate-setting meeting in May.
Uncertainty ahead
Despite the optimistic reading, economists have cautioned that inflation could rise again in April, owing to scheduled increases in household bills. This includes rises in energy tariffs, water bills, council tax, and other services. Additionally, businesses facing higher labour and tax costs may begin to pass those expenses on to consumers.
Nevertheless, March’s data offers a glimmer of hope for households and policymakers alike. It suggests that while the road to price stability is not without bumps, progress is being made.
As inflation edges closer to target and with signs of economic resilience returning, the months ahead may finally offer a more stable economic landscape for both consumers and businesses across the UK.
