FAMAGUSTA GAZETTE – Britain’s Consumer Price Index (CPI) slowed to 2.6% in March, down from 2.8% in February and below market forecasts, according to the Office for National Statistics. The decline was driven by lower prices for entertainment, culture, and games.
Despite the slowdown, banks are adjusting interest rates. National Savings and Investments, the UK government savings bank, raised its two-year bond rate to 4% and its three-year bond rate to 4.1%.
Economists expect inflation to rebound in April as water bills, council taxes, and energy prices rise. Ofwat, the water regulator, has projected a 36% increase in household water costs over five years, while Ofgem, the energy regulator, raised the domestic price cap by 6.4% on April 1.
“Inflation is expected to lift sharply next month with the rise in the Ofgem price caps,” said Anna Leach, chief economist at the Institute of Directors.
Markets anticipate April inflation could exceed 3.5%, with the Bank of England forecasting a rise to 3.75% by the third quarter. Analysts say the bank may proceed with a modest rate cut in May, possibly reducing borrowing costs by 25 basis points.
Ongoing U.S. tariff concerns add uncertainty to Britain’s inflation and interest rate outlook. Analysts warn tariffs could slow global growth and heighten financial instability, potentially leading to more rate cuts than previously expected.