The Office for National Statistics (ONS) in the UK has reported a moderation in the Consumer Price Index (CPI) for March, with the index slowing to 3.2% from 3.4% recorded in February. This marks the lowest level since September 2021.
Despite the decline, the March CPI index slightly exceeded analysts’ expectations of 3.1%. Meanwhile, the core CPI, which excludes prices of energy, food, alcohol, and cigarettes, stood at 4.2% in March, surpassing the forecast of 4.1%.
Investors have been closely monitoring indicators of a slowdown in the British labor market this week. The unemployment rate for December to February rose to 4.2%, while wage growth excluding bonuses dipped from 6.1% in January to 6% in February.
UK headline inflation, which peaked above 11% at the end of 2022, is anticipated to further ease to 2% this month as energy prices decline. However, Andrew Bailey, Governor of the Bank of England (BoE), along with BoE officials, are cautious and await more evidence of subsiding inflationary pressures from the core CPI before considering a reduction in interest rates. The current interest rate stands at 5.25%, the highest level in 16 years.
The moderation in the CPI suggests some relief for consumers, but uncertainties persist amid ongoing economic challenges and inflationary pressures. Market participants will continue to monitor economic data closely for signals regarding the trajectory of inflation and the potential policy responses from the Bank of England.