United Kingdom: Inflation continues to decline in March

Consumer prices rose 0.1% in March over the previous month, down from February’s 0.4% increase. March’s figure was driven by higher prices for food and non-alcoholic beverages and clothing and footwear, which were partially offset by lower prices for alcoholic beverages, tobacco and transport.

Inflation sank to 2.5% in March from 2.7% in February, undershooting analysts’ expectations of 2.7% and marking the lowest figure in a year. As a result, inflation moved closer to the BoE’s 2.0% target. Meanwhile, annual average inflation remained steady from a month earlier at 2.8%. Despite the decline in inflation, there is still a significant probability that the Bank will raise rates on 10 May following its next meeting.

UK Inflation Forecast

The Bank of England sees inflation dipping to 2.4% in Q4 2018 and 2.2% in Q4 2019. FocusEconomics Consensus Forecast panelists expect inflation to average 2.5% in 2018 and 2.1% in 2019, as the impact of the weaker sterling continues to fade.