UK (Parliament Politics Magazine) – UK inflation fell to 2.6% in March, adding pressure on the Bank of England to cut rates amid weak demand and global trade uncertainty.
As reported by The Guardian, a drop in UK inflation to 2.6% has intensified pressure on central bank officials to consider lowering interest rates next month.
Food and fuel role in the inflation drop
According to the Office for National Statistics, a decline in fuel prices and stable costs for recreation and cultural activities contributed to a drop in inflation. However, rising costs for clothing and footwear partially countered this effect.
Food prices also contributed to slowing inflation, remaining flat in March compared to the higher prices observed during the same month last year.
The ONS reported a 1.6p decrease in petrol prices between February and March 2025. The average cost is now 137.5p per litre, down from 144.8p in March 2024.
Charlie Bean’s views on interest rate cuts
The Bank of England is facing growing pressure to cut interest rates when its policymakers meet next month.
Last week, the central bank’s former deputy governor argued that the central bank should focus on reducing borrowing costs by at least half a percent. This recommendation comes amid ongoing tariff uncertainties, despite concerns about inflation.
Meanwhile, ex-Prime Minister Gordon Brown has also called for a coordinated rate cut across all major central banks.
What caused UK inflation to fall below forecasts?
Weak price growth preceded the expected price hike in April, as households prepared for increased council tax and utility costs, alongside uncertainty surrounding Donald Trump’s tariff policy dispute.
The consumer price index saw a drop to 2.8%, missing the predicted 2.7% fall, after standing at 3% in January.
Economic experts had previously predicted that inflation would increase starting in April, reaching a peak of around 4% over the summer before dropping again next year.
The trade war initiated by the US president has raised concerns about CPI forecasts, potentially leading to a lower peak if China is permitted to redirect goods originally intended for the US.
What did the ICAEW survey reveal about UK business confidence and economic concerns?
The recent survey shows a significant dip in UK business confidence, the lowest in more than two years, driven by concerns over tax hikes and Donald Trump’s escalating trade war.
The Institute of Chartered Accountants in England and Wales warned that the start of the year was “harrowing” for UK businesses, highlighting the risks to the economy.
It revealed that over 56% of businesses in their survey cited tax hikes as a rising concern, marking a new high since the survey started in 2004.
What did Suren Thiru say about UK business sentiment amid tax hikes and US tariffs?
Suren Thiru, the economics director at the ICAEW, stated, “These figures suggest that this year has so far been a pretty harrowing one for the UK economy as accelerating anxiety over future sales performance, April’s eye-watering tax hike and US tariffs helped push business sentiment into ominous territory.”
He said, “The mood music on the economy is turning increasingly sour and with forward-looking indicators of sales and employment activity weakening, things may get worse before they get better.”