According to new figures from the National Bureau of Statistics, UK inflation rates rose lower than expected in March 2025.
According to the UK Statistics Agency, inflation measured by the consumer price index increased 2.6% in the 12 months ended March 2025, down from the 2.8% recorded from February to February. The numbers fell below expectations for Factset, an increase of 2.7%.
CPIH, a preferred measure of inflation, including housing costs for ONS owner craftsmen, also fell to 3.4% from 3.7% in February.
“The decline in annual rates reflected a major downward impact from athletic fuels,” ONS said.
The average price for Getrol fell to 137.5p in March 2025 from before 144.8pa in March 2025, ONS reported. The price of the diesel was 144.8p per liter in March. This is a decrease from 154.1p per 10 liters in March 2024.
Why is UK inflation declining?
Disinfection pressure was also seen in the recreational and cultural economies of the UK economy, according to ONS. Overall prices for this segment rose 2.4% in the 12 months to March 2025, down from 3.4% recorded in 12 months to 3.4% in February. Prices in March were the lowest since October 2021, ONS added.
“The decline in annual rates was the result of relatively small downward effects from various detailed classes. The biggest ones came from games, toys, hobbies, and data processing equipment that fell this year but rose a year ago.”
What will the Bank of England do now?
It cuts interest rates so that inflation and lower energy costs puts new pressure on central banks. With the Bank of England’s inflation target of 2%, today’s data shows that it’s still some way to achieve that again. bank We easily met our target in May 2024 Before inflation rises again.
Currently, interest rates are 4.50%, and the bank has made three cuts since it peaked at 5.25% in August 2023.
The ONS figures are also the final measure of UK inflation before some important tax increases came into effect this month. Includes contributions to the employer’s national insurancewhat some companies have already admitted will be offset with price increases. Many other households like energy and water also rose in April for broadband and mobile phone contracts.
Even if the tariff situation is not unfolding, banks already expect inflation to rise again until the end of 2025.
“Changes in global energy costs and regulated prices are expected to boost QPI inflation in 2025 to 3.7% to 3.7%,” the bank’s Monetary Policy Committee said in its quarterly report in February.
“While CPI inflation is expected to return to its 2% target afterwards, (MPC) will pay close attention to signs of more permanent inflationary pressure.”
The next quarterly report is scheduled for May. This is the first time that banks have formally responded to new changes in trade relations between the US and the world. Changes in inflation, economic growth and interest rate forecasts are predicted by economists.
According to overnight interest rate swap data, traders and investors currently believe there is a 98.2% chance from. European Central Bank If we announce the latest decision on Eurozone pricing for April 17th. The same data shows a 103.1% chance of interest rate reductions by the Bank of England when it announced its next rate decision on May 8th. According to current market prices on April 16th, the next dates for the rate cut in the UK will be August and November.
Banks weigh inflation, tariffs and growth
“Given this data and the uncertainty about the impact of US trade tariffs on the economy and inflation, the current MPC guidance to ease financial stance in a “cautious and progressive” way appears to be justified. says Derek Halpenny, head of research at MUFG’s global market EMEA & International Securities.
Zara Nokes, global market analyst at JP Morgan Asset Management, said the banks are heavy enough ahead of the next meeting.
“The risk of inflation has certainly not faded, but the Bank of England is increasingly feeling the need to weigh the risk of rising inflation against the risk of shortcomings to growth,” she says.
“The world economy is beginning to stagnate amid uncertainty in trade policy emanating from the US, and being a small, open economy exposing the UK to such headwinds.
“Direct tariffs on UK exports, coupled with the risk that US trading partners are dumping goods in the UK to avoid US tariffs, could serve as an additional drug for inflation.
“At the same time, while wage growth is still rising, banks are cautious in interest rate reductions so far, but yesterday’s labor market data suggests that a crack is beginning to be shown. If the labor market has significantly worsened following this month’s NIC hike, the pressure on banks to reduce the rate of growth will be strengthened.”
Investors will know the next UK inflation count for April 2025 on May 21st.
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