The March figures once again turned out to be more stubborn than economists had expected, making the Bank of England more likely to raise interest rates.
Inflation has eased slightly but remains above 10%, according to official data showing food costs at a 45-year high.
The Office for National Statistics (ONS) said the consumer price index (CPI) fell to 10.1 percent in March from 10.4% the previous month.
Economists had largely expected a 9.8% figure.
The data represent a small improvement in power control cost of living crisis when fuel prices fell back to levels seen a year ago when Russia’s war in Ukraine caused the price of oil to skyrocket.
However, upward pressure remains from gas, household electricity and food, including necessities such as bread, milk and eggs.
Food and non-alcoholic beverage inflation as measured by the ONS stood at 19.1% – the highest level since August 1977.
This is mainly due to the high cost of goods and production.
Other factors behind the spike were highlighted in February inflation data when salad shortages hit supermarkets.
One small consolation is that prices for commodities such as tomatoes and cucumbers tend to plummet as the UK growing season begins to pick up steam.
ONS chief economist Grant Fitzner said of the overall drop in inflation in March: “The main drivers of the decline were motor fuel prices and heating oil costs, both of which fell after strong gains in same time last year.
“The prices of clothes, furniture and household appliances have increased but slower than a year ago.
“However, these have been partially offset by still-surging food costs, with bread and cereal price inflation at record highs.
“Overall costs facing businesses have largely stabilized since last summer, although prices have remained high.”
The latest figures come amid high hopes that decelerating inflation will allow the Bank of England to pause its anti-inflationary action through rate hikes.
It has raised Bank rates at 11 consecutive meetings since December 2021 in an attempt to stem price pressures in the economy.
While policymakers can’t do anything about things like energy – the main driver of the inflation crisis – Banks can find a way to take demand out of the economy by increasing travel costs. get a loan.
It will be encouraged by the easing of the leading inflation rate.
However, a separate measure closely watched by the Bank to remove volatile price factors, known as core inflation, remained unchanged at 6.2%.
Employment data published on Tuesday also showed wages continuing to rise, albeit at a much lower rate than the CPI.
What is driving wages up?
The bank has previously expressed concern that wage increases intended to counter the impact on household budgets due to inflation, which have been the focus of attention during winter strikes across the economy, may risk of pushing inflation forward.
Financial market data showed the likelihood of a 0.25 percentage point increase in bank interest rates at the next meeting, taking place next month, has increased from 80% to 95%.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, commented: “‘The cauldron of boiling prices has cooled down, but inflation is still climbing and interest rates look set to be pushed up once. more to try to cool it down continuously.
“Instead of falling below double digits, CPI is stubbornly high, causing more damage to companies and consumers.”
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Prime Minister Jeremy Hunt said: “These numbers reaffirm exactly why we must continue to work to reduce inflation so we can ease the pressure on families and businesses.
“We’re on track to do this – with the OBR (Office for Budget Responsibility) forecast we will halve inflation this year – and we’ll continue to support everyone with our support. cost-of-living allowances worth an average of £3,300 per household during this time and last year, funded through taxes on energy profits.”
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Labor Secretary Rachel Reeves said: “The question for families remains as real as ever – when will they feel better under this Conservative government?
“And, why, as the cost of living continues to fall, has the government refused to freeze this year’s council tax, paid with a reluctant tax befitting the oil and gas giants?”
