Interest rate rise in doubt as inflation falls to 2.5%

The rate at which the cost of goods and services is rising has fallen unexpectedly, putting in doubt the Bank of England’s plans to raise interest rates.

Inflation was at a one-year low of 2.5% in March, the ONS says, having fallen from 2.7% in February. Most economists had expected the rate to stay the same, reports Sky News.

Mike Hardie of the ONS said the cause was partly lower women’s clothing sales than usual, perhaps because of the unusually hard winter, and the prices of raw ingredients for food factories rising less than it has in recent months.

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“Alcohol and tobacco also helped ease inflation pressures,” he said, “with tobacco duty rises linked to the Budget not appearing this March, thanks to its new autumn billing.”

The fall “weakened the case” for the Bank of England to raise interest rates next month, says The Guardian, and was followed by a slump in the value of the pound against the dollar. Sterling dropped one cent to $1.42.