Annual rate as measured by consumer prices index dropped to 10.1% in March, says ONS
raising interest rates again next month jumped on the news, with markets pricing in a 97% chance that policymakers will lift the base rate to 4.5% on 11 May and indicating the measure could hit 5% by the autumn.
The smaller than expected inflation dip comes amid a decline in global oil prices over recent months, and as the immediate impact from Russia’s invasion of Ukraine in February falls out of the estimates for the annual increase in consumer prices. However, those falls were offset by the price of food and nonalcoholic drinks accelerating by 19.1% in the year to March, fuelled by record growth in the price of bread and cereals, as well as a sharp rise for biscuits and cakes.
Grant Fitzner, the chief economist at the ONS, said: “The main drivers of the decline were motor fuel prices and heating oil costs, both of which fell after sharp rises at the same time last year. Clothing, furniture and household goods prices increased, but more slowly than a year ago. “However, these were partially offset by the cost of food, which is still climbing steeply, with bread and cereal price inflation at a record high.”
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