Key events

ONS Chief Economist Grant Fitzner says:

“Inflation eased slightly in March to its lowest annual rate for two and a half years.

“Once again, food prices were the main reason for the fall, with prices rising by less than we saw a year ago.

“Similarly to last month, we saw a partial offset from rising fuel prices.”

Full story: UK inflation falls to 3.2%, the lowest level since September 2021

The UK’s annual inflation rate fell in March for a second consecutive month, dropping to 3.2% – the lowest level since September 2021 – easing pressure on households amid the cost of living crisis.

Figures from the Office for National Statistics (ONS) show inflation as measured by the consumer prices index continued to fall from 3.4% in February. City economists had forecast a reading of 3.1%.

A reduction in the rate of inflation does not mean that prices are falling, just that they are rising more slowly. The last time inflation was lower was in September 2021, when it was 3.1%.

It comes as the Bank of England considers the timing of a first cut in interest rates after ramping up borrowing costs to the highest level since the 2008 financial crisis in response to soaring inflation. The measure for the annual increase in living costs reached a 41-year high of 11.1% in October 2022 after the Covid pandemic and Russia’s invasion of Ukraine.

More here.

Motor fuel prices ticked up in March

The price of petrol rose by 2.6p per litre in March, today’s inflation report shows, to an average of 144.8p.

That’s still lower than a year ago, when it was 146.8p.

Diesel prices rose by 2.8p per litre in March to 154.1 pence per litre, down from 166.5p per litre in March 2023.

These movements resulted in overall motor fuel prices falling by 3.7% in the year to March 2024, compared with a fall of 6.5% in February.

Food inflation lowest since November 2021

Skimming through the UK inflation report, we can see that food inflation fell to its lowest level in almost two and a half years.

Prices for food and non-alcoholic beverages rose by 4.0% in the year to March 2024, down from 5.0% to February. The March figure is the lowest annual rate since November 2021, the ONS reports.

Inflation bread and cereals, and for meat, both eased.

The ONS explains:

Prices for bread and cereals rose by 0.2% on the month, compared with a rise of 2.2% a year ago, resulting in an annual rate in March 2024 of 4.0% – the lowest since January 2022. Prices of some bakery products, such as chocolate biscuits and crumpets, fell between February and March 2024 but rose between the same period a year ago.

Meat prices fell by 0.5% between February and March this year, compared with a rise of 1.4% a year ago.

This resulted in an annual rate of 3.1% in the year to March 2024, the lowest rate since November 2021. The main downward effect behind the easing in the rate came from pork products.

This chart shows how UK inflation has fallen back from its surge in 2022:

Core inflation drops to 4.2%

Core UK inflation has also fallen.

The ONS reports that CPI (excluding energy, food, alcohol and tobacco) rose by 4.2% in the 12 months to March 2024, down from 4.5% in February.

Goods price inflation fell to just 0.8%, from 1.1%.

But services inflation was higher – it only eased slightly from 6.1% to 6.0%.

Food prices pushed inflation down

The largest downward contribution to the monthly change in UK inflation came from food, with prices rising by less than a year ago, the Office for National Statistics says.

But petrol and diesel prices had an upward impact – motor fuels prices rose in March this year but fell a year ago.

UK INFLATION REPORT RELEASED

Newsflash: UK inflation has fallen to its lowest level in two and a half years, as price pressures continue to ease.

The consumer prices index has dropped to 3.2% in March, the lowest since September 2021, down from 3.4% in February.

That’s slightly higher than City economists expected (they’d pencilled in a drop to 3.1%).

It brings inflation further towards the UK’s 2% target, and away from the 40-year peak over 11% in autumn 2022.

But although inflation has fallen, prices are still rising compared with last year – just at a slower rate.

It means real wages are still rising, as regular pay grew by 6% per year in the three months to February.

Economists expect a further decline in inflation in April, with potential to fall below the Bank’s 2% target aft