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UK Inflation Falls to 2.6% in March, Lowest in Three Months
UK inflation eased to 2.6% in the 12 months to March 2025, according to official figures released in April. This marks the lowest rate in three months and a small drop from February’s 2.8%.
The fall was driven by lower fuel prices and stable food costs, helping to ease pressure on households. However, clothing prices rose sharply after an unexpected decline earlier this year, according to the Office for National Statistics (ONS).
This latest figure came in below economists' expectations of 2.7%, based on a Reuters poll.
BoE Faces Tough Call as Summer Price Hikes Approach
While inflation is now closer to the Bank of England’s 2% target, policymakers are still cautious. The Bank had previously forecast inflation to peak at around 3.7% this summer, fueled by rising energy bills and changes to regulated utility and transport prices.
The BoE is set to meet on May 8, and markets are pricing in a possible rate cut—from 4.5% to 4.25%. However, global uncertainty may complicate that decision.
Trump’s Tariffs Could Hit UK Prices
Former U.S. President Donald Trump’s new trade tariffs on China are stirring fears of a global economic slowdown. Economists say this could affect UK inflation in two opposite ways:
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Downward pressure: More Chinese goods could be redirected to Europe, increasing supply and lowering prices.
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Upward pressure: Supply chain disruptions and global tariffs could raise the cost of imported goods.
Martin Sartorius, principal economist at the Confederation of British Industry, said:
“These tariffs could both increase and decrease inflation, but we expect the Bank of England to move cautiously when adjusting interest rates.”
Signs of Cooling Across Key Indicators
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Services inflation fell from 5.0% in February to 4.7% in March.
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Core inflation (excluding food, energy, and tobacco) also dipped slightly.
Despite the progress, inflation is still well above pre-pandemic levels. Public concerns about the rising cost of living remain high, and the Bank of England is closely watching wage growth and consumer expectations before making further decisions.
