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Inflation rate falls again hitting lowest level in more than two years – what it means for your money
This month's figure is the lowest inflation rate since September 2021
THE UK's inflation rate fell last month to the lowest level in two and a half years.
Consumer Prices Index inflation stood at 3.2% in March according to new data from the Office for National Statistics (ONS).
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This is down from 3.4% in February and marks the lowest level since September 2021.
But the figure was still slightly higher than economists expected, with many predicting a fall to 3.1% for the month.
Inflation is now closer towards the Bank of England’s 2% target.
The latest fall in the rate of inflation shows “that after a tough couple of years, our economic plan is working”, Prime Minister Rishi Sunak has said.
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Chancellor of the Exchequer, Jeremy Hunt added: “The plan is working: inflation is falling faster than expected, down from over 11% to 3.2%, the lowest level in nearly two and a half years, helping people’s money go further.
"This welcome news comes on top of our cuts to national insurance, which save the average worker £900 a year, so people should start to feel the difference as well as see it in their pay cheques.”
Inflation is a measure of how much the prices of everyday goods like food and clothes, and services like train tickets and haircuts, are now compared to a year earlier.
It's important to note that when inflation drops it doesn't mean that prices have stopped rising, it just means they are doing so at a slower pace.
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Last month's fall is off the back of easing food prices which was a main contributor to bringing inflation down.
Inflation for food and non-alcoholic drinks is continuing to ease, edging down to 4% in March from 5% in February.
The dip was partly driven by a fall in meat prices and lower rises for bread and cereals, the ONS said.
UK inflation rate falls to 3.4% in February – what it means for your money
Food inflation is now at its lowest level since November 2021.
ONS chief economist Grant Fitzner said: “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.”
Inflation was at 3.4% in February – down from 4% in January and the lowest since September 2021.
The ONS said Services inflation, which the Bank also watches closely, eased slightly to 6% from 6.1% a month earlier.
Falling inflation offers some hope to mortgage holders and prospective buyers, who will be hoping for interest rate cuts.
But pressure is now on the BoE to reduce interest rates which are at a 16-year high.
To do so it will be looking for signs that services inflation has weakened.
The BoE is due to meet again to assess interest rates on May 9.
What it means for your money
If inflation is high it means that the cost of your everyday essentials is going up - therefore your money doesn't go as far.
Alice Haine, personal finance analyst at Bestinvest, said: "Easing inflation will certainly deliver some cheer to households as it signals the rapid price rises seen at the height of the cost-of-living crisis can now be consigned to history."
Alice warns this doesn't mean shopping bills will drop - prices are still going up but supermarkets will be able to offer more discounts.
Shoppers should still compare prices carefully and make use of deals and loyalty schemes.
The Bank of England (BoE) and the UK's central bank may hike its base rate to try and bring inflation down when it's too high
When this happens people with savings may see a boost but homeowners will feel the pinch as interest rates on mortgages will rise.
But Megan Greene, one of the Bank’s rate-setters said last week that interest rate cuts “should still be a way off”.
Alice says: "The latest inflation data will be a relief for buyers and those looking to remortgage hoping for interest rate cuts."
However, there is still uncertainty over when the will actually happen.
Decision makers decided to keep the Bank’s base rate at 5.25% last month for the fifth consecutive time.
As a result mortgage rates have started to creep back up with the average two-year fix rate rising back to 5.8%.
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The news comes after we revealed yesterday, that wages are rising for millions across the UK.
Growth in regular pay, excluding bonuses, was 6% in the three months to February this year.
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