Rate rise in the balance as inflation slides

UK inflation has unexpectedly fallen to a one-year low of 2.5 per cent – the first consecutive monthly contraction in price rises since 2015.

The latest fall, down from 2.7 per cent in February, was seen yesterday as giving Bank of England governor Mark Carney and his colleagues leeway to hold fire on a mooted further interest rate rise in May.

The Bank raised rates 0.25 per cent to 0.5 per cent last November, the first monetary tightening in ten years. The Office for National Statistics (ONS) partly attributed lower inflation last month to downward pressure on footwear and clothing.

Those sub-sectors rose 0.7 per cent on a monthly basis in March compared with 2 per cent over the same period in 2017, the latter seen as high compared with previous years.

Yesterday’s Consumer Prices Index (CPI) figures wrongfooted City economists, most of whom expected inflation to have stayed unchanged from February.

ONS head of inflation Mike Hardie said: “Inflation fell to its lowest rate in a year, with women’s clothing prices rising slower than usual for the first time this year.

“Alcohol and tobacco also helped ease inflation pressures, with tobacco duty rises linked to the Budget not appearing this March, thanks to its new autumn billing.”

Chancellor Philip Hammond has changed the timing of the Budget from spring to autumn, meaning significant government decisions that might have affected tax and prices were announced late last year. 0 Mark Carney, governor of the Bank of England