LONDON (AP) – UK inflation rates experienced a decline for the second consecutive month in March, primarily due to reduced fuel prices. Official statistics released on Wednesday indicate a situation that could exert pressure on the Bank of England in the upcoming month.
The National Bureau of Statistics reported that consumer prices had increased by 2.6% annually, a decrease from the 2.8% observed in the prior month. This drop was more significant than anticipated, as most economists had forecasted a modest reduction to 2.7%.
Despite this decline, inflation rates remain above the Bank of England’s target of 2%, and are expected to rise above 3% in April due to climbing domestic energy costs and various other factors, including the potential repercussions of increased taxes and labor expenses on businesses, which may pass some of these costs onto consumers.
Nevertheless, a majority of economists believe that the Bank could lower key interest rates from 4.50%, especially since the peak inflation is anticipated to be less than previously projected. This expectation is influenced by US President Donald Trump’s tariff policies, which may impact global growth and subsequently, prices. One of the ramifications of these tariff plans is a reduction in oil prices, which could help ease inflationary pressures.
“Interest rate cuts in May seem increasingly likely, and the prospect of further easing in the latter half of the year is becoming clearer,” remarked Luke Bartholomew, assistant chief economist at asset management firm Aberdeen.
Inflation has fallen significantly from levels observed in previous years. Increased borrowing costs have emerged from near-zero rates during the coronavirus pandemic, with prices rising later due to supply chain disruptions. Additionally, Russia’s full-scale invasion of Ukraine has contributed to increased energy expenses.
As inflation rates have decreased from their peak, the US Federal Reserve System has also begun to cut interest rates, though they do not expect rates to return to the ultra-low levels experienced during the pandemic, which followed the global financial crisis of 2008-2009.
The Bank of England has reduced its main rate three times since last August, recently lowering it in February to a quarter of 5.25% from a 16-year high.
Source: apnews.com