UK inflation at lowest since September 2021, but falls less than expected

17th Apr 2024 07:28

(Sharecast News) - UK inflation fell to its lowest in three and a half years last month, but eased less than expected, which is likely to prompt caution from the Bank of England to get price pressures in check before cutting interest rates.

The consumer price index rose at a year-on-year rate of 3.2% in March, down from 3.4% in February but ahead of the 3.0% expected by analysts.

Still, this was the lowest annual rate seen since September 2021.

The slowdown in price growth was mainly caused by a big drop in food inflation, to 4.0% from 5.0% the month before, while the cost of housing continued to fall. Transport prices, however, increased by 0.1% after four straight months of declines.

The core rate of inflation, which excludes volatile items like energy, food, alcohol and tobacco, eased to 4.2% in March from 4.5% the month before - hitting its lowest level since December 2021.

On Tuesday, the Office for National Statistics revealed that the UK unemployment rate unexpectedly picked up to 4.2% in the three months to February from 4% previously, while earnings growth (including bonuses) held steady at 5.6%, missing forecasts for a slowdown to 5.5%.

Commenting on the data, Daniel Austin, chief executive and co-founder at ASK Partners, said falling inflation "suggests that the Bank of England is likely to maintain interest rates for an extended period, particularly considering the signs of economic recovery we've witnessed".

He added: "This all points to a positive domestic story of an economy exiting a mild recession but does mean that pressure will remain on those servicing debt and with ongoing global market uncertainty surrounding the Middle East crisis, the coming months are set to be shaky."