Inflation fell slightly last month to 10.1 per cent following a shock rise in February. The figure was slightly above what economists had predicted – a fall to 9.8 per cent – but below the 10.4 per cent recorded in February.
The Office for National Statistics said the double-digit price growth in March was primarily driven by rising food prices. Despite the fall in inflation, households are still expected to face pressure on their finances for the coming months but policymakers will be keen to see a return to the expected pattern of cooling prices.
Jeremy Hunt, the chancellor, said: “These figures reaffirm exactly why we must continue with our efforts to drive down inflation so we can ease pressure on families and businesses.
“We are on track to do this – Office for Budget Responsibility forecasting we will halve inflation this year – and we’ll continue supporting people with cost-of-living support worth an average of £3,300 per household over this year and last, funded through windfall taxes on energy profits.”
Investec, a financial services company, said: “Following the significant upside surprise in the February numbers, we expect a clear easing back to have taken place in March.”
They said a drop was largely driven by lower petrol prices as demand continues to recover globally, particularly given that the new data will compare with March 2022, where prices shot higher following Russia’s invasion of Ukraine.
Investec added that “supply chain disruptions and lower shipping costs” were also behind the falling goods prices.
Deutsche Bank senior economist Sanjay Raja added that a “reversal of very strong clothing inflation” could also help broader inflation drop again.
A notable drop in inflation could help mortgage-holders, the Bank of England is hoping.
At the Bank’s previous meeting last month, it said there were signs inflation was peaking, increasing expectations it could pause rate hikes.
In the previous meeting, interest rates were lifted by 0.25 percentage points to a 14-year high of 4.25 per cent.
The latest inflation update comes one day after the ONS revealed that regular pay excluding bonuses rose by 6.6 per cent over the three months to February, but was down 3.4 per cent once CPI is taken into account.
