Inflation falls to two-and-a-half year low

The annual rate of inflation fell to 3.2% in March 2024, according to the latest Consumer Price Index (CPI) figures from the Office of National Statistics (ONS), its lowest level in two and a half years.

The latest fall represents a 0.2 percentage-point drop on February’s figures, with March’s inflation rate slightly higher than had been anticipated by economists.

Among the main product categories slowing the rate of inflation was food and drink products. In March 2023, food prices had seen a 19.2% increase on the previous year, but this year, that figure has fallen to 4%. Conversely, petrol and diesel prices were falling in March 2023, but saw small month-on-month rises to 144.8 pence per litre and 154.1 pence per litre respectively.

The latest fall continues the downward trend of inflation from its 11.1% peak in October 2022, with the CPI now at its lowest level since September 2021, when inflation stood at 3.1%. The trend is set to continue into April, when a revised energy price cap for domestic electricity and gas customers will be reflected in the data.

Despite the recent fall, inflation remains above the Bank of England’s 2% target and so its Monetary Policy Committee is not expected to begin cutting interest rates when it meets in early May.

Internationally, the UK is in line with other developed economies in seeing inflation continue to fall although both France and Germany saw much sharper falls in their rates of inflation in March, reporting rates of 2.4% and 2.3% respectively.