UK inflation falls more than expected in March
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The news: The UK’s consumer price index (CPI) for March saw inflation slow ahead of expectations, providing slight relief for the Bank of England as the country prepares for the economic fallout of the US’ tariffs.
The numbers: Headline inflation rose by 2.6% in the 12 months to March 2025, down from 2.8% in the 12 months to February. The figures came in below the 2.7% forecast by economists in a Reuters poll.
On a monthly basis, CPI rose by 0.3% in March 2025, compared with a rise of 0.6% in March 2024.
Core CPI (which strips out energy, food, alcohol and tobacco) rose by 3.4% in the 12 months to March 2025, down slightly from 3.5% in the 12 months to February.
The context: The Office for National Statistics said the biggest contributions to the decline came from recreation and culture, in particular for games, toys and data processing equipment, as well as from lower petrol prices.
On the back of the softer figures, traders priced in at least three quarter-point cuts from the Bank of England by the end of 2025, with an 85% chance that the first cut will come at May’s meeting.
The BoE's challenge to balance a weakening jobs market and a potential rise in inflation later in the year as household utility bills increase has been complicated by Trump's trade war, with the UK hit by Trump's 10% baseline tariff and 25% steel and auto levies.
What they said: Chief economist for the ONS, Grant Fitzner, said “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, following the unusual decrease in February.”
The sources: Office for National Statistics, Bloomberg
