In March 2024, UK inflation decreased to 3.2%, the lowest rate since September 2021, from 3.4% in February, as reported by the Office for National Statistics (ONS). Contrary to expectations of a 3.1% rate projected by economists, this decline marks a positive shift amid ongoing cost of living challenges. While this reduction reflects a positive trend, prices in the UK continue to rise at a relatively faster rate than in other European nations such as France and Germany.

Major contributions to the drop in inflation were observed in food prices, where the rate decreased from 5% to 4%. Food items such as bread, cereals, and meat specifically noted price reductions. Core inflation, which excludes energy, food, alcohol, and tobacco costs, also saw a decline to 4.2%.

In contrast to the decline, the services sector’s inflation remains elevated at approximately 6%. However, this slight easing comes at a time when the Bank of England contemplates initiating interest rate cuts from its current rate of 5.25% starting in June, following multiple increases in response to the post-Covid economic scenario and the Ukraine conflict.

Moving ahead, UK inflation is expected to fall further in April with the potential for a Bank of England interest rate cut. The conservative government views the decrease as an opportunity to potentially introduce tax cuts before the general election, adding a dynamic to the broader economic landscape.

Despite the positive indicators, risks such as potential spikes in oil prices due to Middle East tensions might influence future inflation rates. However, the current trajectory suggests moving towards the Bank of England’s target inflation rate of 2%, offering a more favourable economic outlook for UK households as the months progress.