Inflation falls more than expected to 2.6% in March

Inflation has fallen more than expected to 2.6% in the 12 months to March 2025, down from the 2.8% rise in February, driven largely by a fall in petrol prices.

According to the ONS, the largest downward contributions came from recreation and culture and motor fuels, with a further large downward effect from housing and household services.

The largest, partially offsetting, upward contribution came from clothing and footwear.

Core CPIH (excluding energy, food, alcohol and tobacco) rose by 4.2% in the 12 months to March 2025, down from 4.4% in the 12 months to February, while core CPI rose by 3.4%, down slightly from 3.5% in the 12 months to February.

Overall prices in the recreation and culture division rose by 2.4% in the 12 months to March 2025, down from 3.4% in the 12 months to February. The rate in March was the lowest seen since October 2021, when it was also 2.4%.

According to the ONS, the fall in inflation comes as the average price of petrol fell by 1.6 pence per litre between February and March 2025 to 137.5 pence per litre, down from 144.8 pence per litre in March 2024. 

ONS chief economist Grant Fitzner said: “Inflation eased again in March, driven by a variety of factors including falling fuel prices and unchanged food costs compared with the price rises we saw this time last year. 

“The only significant offset came from the price of clothes, which rose strongly this month, following the unusual decrease in February.” 

Martin Sartorius, principal economist at the CBI, said: “March inflation coming in broadly in line with Bank of England expectations is welcome news, particularly ahead of a likely pick up in price pressures in April due to higher energy costs, regulated price increases, and the passthrough of Autumn Budget measures.

“The introduction of higher US tariffs adds some uncertainty to the outlook, as they could put both upward and downward pressure on inflation in the UK. Businesses welcome the government’s ongoing commitment to the principles of free, fair, and open trade, as well as promising to go further and faster to support firms during this period of instability.”

He added: “Today’s data suggests that the Bank of England’s Monetary Policy Committee will likely cut rates next month. Looking ahead, we expect them to continue their ‘gradual and careful’ approach to reducing borrowing costs amid an uncertain economic environment.”