The U.Okay.’s Client Costs Index (CPI) inflation charge dropped to 2.6% in March, down from 2.8% in February, in line with information launched by the Workplace for Nationwide Statistics (ONS) immediately. This marks the bottom inflation studying since December and is available in beneath economists’ expectations of two.7%.
Key factors from the ONS report:
- Headline CPI fell to 2.6% in March from 2.8% in February
- Core inflation (excluding meals, power, alcohol and tobacco) eased to three.4% from 3.5%
- Companies inflation decreased notably to 4.7% from 5.0%
- Recreation and tradition, motor fuels, and eating places and motels contributed to the slowdown
- Clothes and footwear costs rose, offering the biggest offsetting upward impact
Hyperlink to ONS report (March 2025)
“Inflation eased once more in March, pushed by a wide range of components together with falling gas costs and unchanged meals prices in contrast with the worth rises we noticed this time final yr,” ONS Chief Economist Grant Fitzner mentioned. The typical value of petrol fell by 1.6 pence per litre between February and March to 137.5 pence per litre, down from 144.8 pence per litre in March 2024.
The drop in providers inflation to 4.7% is especially important because it’s a key metric watched by the Financial institution of England for indicators of persistent value pressures within the economic system.
Market Reactions
British pound vs. Main Currencies: 5-min
Overlay of GBP vs. Main Currencies Chart by TradingView
The British pound confirmed a muted response to the inflation information, buying and selling choppily with no clear directional bias instantly following the discharge. Whereas GBP initially strengthened towards some main currencies, the strikes have been modest all through early London session commerce.
GBP began to show barely decrease forward of the U.S. session, probably on merchants growing their bets on rate of interest cuts following the discharge, now pricing in a minimum of three quarter-point reductions by the top of the yr, with the primary reduce broadly anticipated on the Financial institution of England’s subsequent assembly on Could 8.
We additionally noticed a basic rise in broad risk-off sentiment as world tariff tensions continued to escalate on the session, this time sparked by information of the U.S. authorities requiring Nvidia a license to export to China and China demanding extra respect from the U.S. Threat aversion could have introduced some strain to GBP as nicely given its typical tendency to behave as a beta forex in most broad market threat phrases (i.e., falls when broad threat sentiment is internet unfavorable and vice versa).
The comparatively subdued market response probably displays that whereas the inflation studying was barely higher than anticipated when it comes to inflation transferring in the fitting path for financial resilience, buyers are already centered on the April inflation information, which is able to seize the impression of assorted value will increase that took impact in the beginning of the fiscal yr.
