Inflation has cooled to the lowest level in more than two years.
The Consumer Prices Index (CPI) rose by 3.2 per cent in the 12 months to March 2024, down from 3.4 per cent in February, figures published today show.
City economists had forecast a lower drop of 3.1 per cent.
Lily Megson, Policy Director at My Pension Expert, said, “This easing brings a glimmer of relief for consumers, marking a consecutive downturn from last month’s rate. But is it enough to restore savers’ confidence? That remains to be seen.
“While retirees may find some solace in the latest state pension rise courtesy of the triple lock, it’s important to recognise that this alone won’t begin to address all the UK’s pension challenges.
"There’s a pressing need for additional support for those nearing retirement, empowering them to safeguard their pensions against broader fluctuations in the economy.”
City economists had forecast a lower drop of 3.1 per cent
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The fall in inflation was largely due to food prices slowing, according to the Office for National Statistics (ONS).
Although inflation has fallen, prices are still rising compared with last year – just at a slower rate.
It brings inflation further towards the UK’s two per cent target, and away from the 40-year peak seen in 2022.
Chancellor of the Exchequer, Jeremy Hunt said: “The plan is working: inflation is falling faster than expected, down from over 11 per cent to 3.2 per cent, 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.”
Rachel Reeves, Labour’s shadow chancellor, said: “Conservative ministers will be hitting the airwaves today to tell the British people that they have never had it so good. However, after 14 years of economic failure under the Conservatives working people are worse off.
“Prices are still high in the shops, monthly mortgage bills are going up and inflation is still higher than the Bank of England’s target. At the same time Rishi Sunak risks crashing the economy again with his Liz Truss-backed £46billion unfunded tax plan to abolish national insurance.
“The truth is Rishi Sunak is too weak to fix the economy his party broke and too out of touch to deliver for working people. It’s time for change. Only Labour has a long-term plan to grow our economy, cut people’s bills and make working people better off.”
Figures shown that core inflation was also slightly higher than expected at 4.2 per cent.
Grant Fitzner, chief economist for the ONS, said that rising fuel prices off-set lower costs elsewhere.
He said: "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."
A lower inflation rate is welcome for low income households who continue to be squeezed by the cost of living crisis.
Borrowers are hoping for a further boost from the Bank of England in the coming months as falling inflation could push the base rate down.
An interest rate cut, from the current 5.25 per cent level, would ease borrowing costs that have increased monthly bills through higher mortgage rates.
The drop was largely due to food prices slowing sharply, according to the Office for National Statistics (ONS)
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What does inflation rate mean for my mortgage?
The declining inflation is a “win” for first-time buyers and homeowners who will remortgage this year, Jonathan Bone, mortgage lead to Better.co.uk said.
He explained: “The Bank of England may now consider reducing the base rate sooner rather than later, which could give mortgage lenders an incentive to offer more enticing deals.“
"Those looking to climb the property ladder may be hesitant to take the next step, hoping interest rates may fall, but there's never a perfect moment to buy a home. Don't let the pursuit of potential savings mean you miss out on your dream home - mortgage offers typically last between three to six months, giving you the flexibility to switch to a better rate if interest rates are cut later this year.
“For those needing to remortgage this year, you can speak to a mortgage broker up to six months before the end of your current deal to understand how much extra you need to budget per month on your mortgage repayments.”