UK inflation eased for the second consecutive month in March, offering some relief to households. The Office for National Statistics reported a 2.6% year-on-year increase in the Consumer Price Index, down from 2.8% in February, and below economists' forecast of 2.7%. The decline was attributed to falling fuel prices, while food prices remained stable. Service sector inflation also decreased from 5% to 4.7%, a key indicator for the Bank of England in assessing domestic inflation pressures.
Despite the easing inflation, UK households face an average increase of £600 ($795.81) in basic expenses such as council tax, energy, and water bills. This is expected to push inflation above 3% this summer. Following the inflation data release, the currency market increased its bets on the Bank of England cutting interest rates this year, with expectations of an 86 basis point reduction by year-end, up from 82 basis points. A 25 basis point cut is anticipated next month.
The British pound continued its upward trend against the dollar, rising 0.3% to 1.3273, after reaching a six-month high of 1.3289 earlier, marking its longest rally since July last year.
