UK consumer prices rose at their slowest pace in two and a half years Office for National Statistics report on Wednesday.
Inflation was 3.2% in the year to March, down from 3.4% in February but higher than the 3.1% expected by economists. Core inflation, which strips out volatile food and energy prices, was 4.2%, down from 4.5% the previous month.
Economists predict inflation will continue to slow over the next few months, possibly falling below the Bank of England's 2% target as household energy bills fall. Headline inflation peaked at 11.1% in October 2022.
The economic weakness pressured the central bank to cut interest rates. of England unemployment rate rose more than expected in the latest report released this week.
Jake Finney, an economist at PwC, wrote in a note that this represents a “difficult balancing act” for the Bank of England. Slowing inflation puts pressure on banks to cut interest rates “to help the economy grow again,” he said, but policymakers may want “more convincing evidence that we achieved their target sustainable returns before they moved to cut interest rates.”
Last month, Bank of England leaving the key interest rate at 5.25% for the fifth consecutive meeting.
The US Federal Reserve has also keep the exchange rate stable at recent meetings. The Fed will likely have to wait longer than initially expected to cut interest rates, as inflation data remains difficult, two top Fed officials said. said this week.
Last week, European central bank gave the clearest signal yet that it could lower interest rates at its policy meeting in June, as inflation in the euro zone slows and the regional economy weakens.
