Consumer price inflation in the UK dropped to 2.5% in March from 2.7% in February, according to the Office for National Statistics.
The reading was lower than what most economists had forecast.
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 2.3% in March 2018, down from 2.5% in February 2018.
March’s decline is the second straight month of weaker price rises, something that hasn’t happened since August – September 2015.
Clothing and footwear prices rose at a slower rate than the same month last year. Mike Hardie, the ONS’s head of inflation said that part of the fall was driven by “women’s clothing prices rising slower than usual for this time of year,”
“Alcohol and tobacco also helped ease inflation pressures, with tobacco duty rises linked to the Budget not appearing this March, thanks to its new autumn billing,” Hardie added.
The March inflation data comes only a day after the ONS revealed that wages in the UK increased by 2.8% in February. It’s the first time since the beginning of 2017 that wages in the UK are growing in real terms.
The data has cast doubts over whether the Bank of England will move forward and raise interest rates in May.
Suren Thiru, head of economics at the British Chambers of Commerce, said in a tweet, “With CPI inflation dropping to 2.5% in March, the Bank of England’s case for raising interest rates looks limited at best.”
David Cheetham, chief market analyst at XTB, a trading firm, told the BBC: “The bank has been widely expected to hike rates again next month, as inflation remains stubbornly above target, but the latest data suggest that a high-water mark may have been reached.
“Therefore, the bank could well now decide to stand pat in May and await further developments as it appears that inflation could now be starting to move in the right direction.”
After Wednesday’s inflation figure the pound dropped by as much as 0.7% against the dollar to below $1.42.