UK inflation fell all the way to 2.6% in March. Pressure is mounting on the Bank of England to cut interest rates in wake of Trump’s tariffs and a climate of uncertainty.
According to the Office for National Statistics (ONS), declining fuel prices and slower increases in the cost of leisure activities contributed to lowering inflation. However, higher prices for clothing and footwear provided a counterbalance to these factors. Food prices also played a role in reducing price growth, as they remained unchanged in March.
What Will The Bank of England Do?
The Bank of England’s general target for inflation is 2%. Financial markets predict an 86% probability that British interest rates will drop. Charlie Bean, a former deputy governor of the Bank, stated last week that due to the uncertainties surrounding tariffs, the Bank should prioritize reducing borrowing costs by at least half a percent and momentarily disregard inflation worries. Meanwhile, former Prime Minister Gordon Brown urged all major central banks to jointly implement a coordinated reduction in interest rates.
The British chancellor of the exchequer, Rachel Reeves, stated: “Inflation falling for two months in a row, wages growing faster than prices and positive growth figures are encouraging signs that our plan for change is working, but there is more to be done.
“I know many families are still struggling with the cost of living and this is an anxious time because of a changing world. That is why the government has boosted pay for 3 million people by increasing the minimum wage, frozen fuel duty and begun rolling out free breakfast clubs in primary schools.” All eyes turn to see if the Bank of England will cave to political and public pressure as UK Inflation remains low.
Sources
The Guardian – UK inflation falls to 2.6%, increasing pressure on Bank to cut interest rates
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