Inflation falls to 2.6%

Latest data from the Office of National Statistics (ONS) has shown that inflation fell slightly to 2.6% in March, down from the 2.8% reported in February.

Annualised inflation was forecast to come in at 2.7%. Core Inflation (excluding food, energy, alcohol, and tobacco) came in at 4.2% in the 12 months to March, down from 4.4% in February

Commenting on the inflation figures for March, 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.”

Anna Leach, Chief Economist at the Institute of Directors, said “Inflation has come in a little lower than expected again in March, with services inflation easing to 4.7% while goods inflation dropped to 0.6%. Downward pressures on inflation broadened this month to seven categories, with recreation and culture subtracting most from the annual rate. Inflation is expected to lift sharply next month with the rise in the Ofgem price cap.

“Tariff turbulence injects new uncertainty into the outlook for inflation and interest rates in the UK. Tariffs set on goods coming into the US can affect the UK via a number of channels: lower global growth (creating less demand for UK exports and lowering commodity prices), financial market volatility, exchange rate volatility, supply chain effects and trade diversion into UK. Many of these effects put downward pressure on inflation – indeed gas prices are now some 40% below their February peak while Brent Crude is 7% down over the same period. We may see more interest rate cuts than previously expected this year which would provide some welcome support to the economy.”

Neil Rudge, Chief Banking Officer, Commercial at Shawbrook said “News that the inflation rate fell in March will provide a welcome, if modest, relief for SMEs. Lower inflation could ease pressure on supply chains and operating costs, but for many small business owners, the reality remains challenging. Rising employer National Insurance contributions and the recently increased minimum wage continue to squeeze cash flow at a time when growth is already hard-won.

“Meanwhile, international uncertainty persists. With trade tensions threatening to escalate, exporting SMEs face ongoing volatility- further complicating strategic planning for businesses that rely on overseas markets.

“Despite these headwinds, a drop in inflation may help reinforce expectations of future interest rate cuts, which could improve confidence among SME leaders. Many are cautiously optimistic and beginning to revisit postponed growth plans, but greater support is needed to help them take action. The government’s review into SME access to finance is an encouraging step, but more needs to be done to ensure the right funding is available when it’s needed. In these uncertain times, flexible lending solutions remain essential- supporting businesses to stay agile, manage rising costs, and invest with confidence.”

James Burgess, Head of Commercial and insolvency expert at Atradius, said “The fall in inflation to 2.6% offers a much-needed boost for both businesses and consumers, setting a more optimistic tone as we enter the new tax year.

“With interest rates holding at 4.5%, this anticipated drop in inflation is restoring confidence across the UK and supports the government’s measured economic approach following the Spring Statement, particularly as households continue to feel the pressure of rising bills.

“However, challenges remain. Ongoing volatility in UK tariff policy continues to pose a threat to economic stability. To stay competitive and resilient, businesses must prioritise liquidity, reinforce their supply chains, and protect themselves with trade credit insurance. These steps are vital to navigating uncertainty and unlocking growth in an unpredictable landscape.”

Paul Noble, CEO of Chetwood Bank, said “Today’s inflation figures suggest a fragile but promising momentum – a second month of stability that hints we may be turning a corner, though not yet out of the woods. For many, this will feel less like a breakthrough and more like a cautious exhale, especially given the many troubling factors surrounding the economy.

“The Spring Statement outlined a careful balance between support and sustainability – and today’s figures should give the Chancellor a little more breathing room. That said, looming global pressures, including President Trump’s tariff policies, could still feed into rising costs in the months ahead. The path to long-term price stability is far from guaranteed.

“For now, the Bank of England may feel more confident in its long walk to rate cuts, though it will remain watchful of any external shocks. This is also a crucial moment for savers – locking in strong rates while they remain available could provide valuable protection. Lenders and financial institutions have a duty to offer smart, flexible options that help customers navigate an uncertain landscape with confidence.”

John Phillips, CEO of Just Mortgages and Spicerhaart, said “While positive and better than many expected, it’s still hard not to see today’s news of another fall in inflation as a bit of a hollow victory, given that the new financial year brings new tax changes and price hikes which will undoubtedly add fuel to the inflationary fire. That’s not even considering any potential fallout from a tit-for-tat tariff war which rumbles on.

“What is good news is that a positive reading on inflation is likely to help influence the MPC’s decision next month on interest rates, as will the need to stimulate growth amid the threat of economic uncertainty. With expectations of a cut, we have already seen swap rates react favourably and lenders across the board announce reductions. With so much in play and plenty of headwinds – both at home and abroad – it’s hard to predict with any great certainty how long this trend will continue. One of the biggest factors will continue to be the future path of inflation and how this shifts the bank’s expectations on future interest rates.

“What we do know is consumers are the winners of increasing competition among lenders. Even at a time of the year full of distractions and disruption, our buyer registration numbers, valuation requests and booked appointment numbers remain pretty robust. Meanwhile, the best brokers are staying close to clients, keeping them abreast of changes in the market and using their skills and expertise to deliver a five-star service. No matter what, this has to remain the priority.”

Simon Webb, Managing Sirector of capital markets and finance at LiveMore, said “A falling inflation rate is a welcome sign that economic pressures could begin to ease. This may boost confidence in the property market, where activity has picked up in recent months, although affordability remains a challenge for many. For those on fixed incomes or dealing with higher mortgage costs, the outlook is improving – particularly as the market begins to price in potential rate cuts. In later life lending, this opens up new possibilities. The mortgage market has expanded to meet the needs of older borrowers, offering more flexibility than ever before. At LiveMore, we’re committed to helping people aged 50 to 90+ find solutions that suit their circumstances – and our Mortgage Matcher® tool is helping advisers do just that in today’s changing market.”