THE UK’S rate of inflation has fallen again in March.
The Office for National Statistics (ONS) said the Consumer Price Index (CPI) measured 2.6% in the 12 months to March, which was below economists expectations.
The latest inflation figures have been published today[/caption]
This is compared to a reading of 2.8% in February, a drop on January’s figure of 3%.
Officials said a drop in fuel prices helped inflation edge down, and also recreational activities.
Inflation is a measure of how much the prices of everyday goods such as food and clothes, and services such as train tickets and haircuts, have increased compared to a year earlier.
When inflation falls it means prices are going up at a slower pace than the month before.
The Bank of England has a target to keep inflation at 2%.
Meanwhile, inflation is expected to hit 3.7% in the summer, driven by increases in the price of energy and food.
It comes just one day after the ONS published its latest labour market data, with wages remaining high.
The Bank of England will look at today’s inflation data and wages when making a decision about whether to hold or cut interest rates.
Most economists are predicting that rates will be cut on May 8 down from its current figure of 4.5%.
Why does inflation matter?
INFLATION is a measure of the cost of living. It looks at how much the price of goods, such as food or televisions, and services, such as haircuts or train tickets, has changed over time.
Usually people measure inflation by comparing the cost of things today with how much they cost a year ago. The average increase in prices is known as the inflation rate.
The government sets an inflation target of 2%.
If inflation is too high or it moves around a lot, the Bank of England says it is hard for businesses to set the right prices and for people to plan their spending.
High inflation rates also means people are having to spend more, while savings are likely to be eroded as the cost of goods is more than the interest we’re earning.
Low inflation, on the other hand, means lower prices and a greater likelihood of interest rates on savings beating the inflation rate.
But if inflation is too low some people may put off spending because they expect prices to fall. And if everybody reduced their spending then companies could fail and people might lose their jobs.
See our UK inflation guide and our Is low inflation good? guide for more information.
