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Easing inflation may force interest rate voting split

Author: ICAEW Insights

Published: 19 Apr 2023

Official data reveals that UK inflation remains in double digits, despite slowing in March.

The inflation figures released on Wednesday 19 April 2023 by the Office for National Statistics (ONS) reported that the Consumer Prices Index (CPI) rose by 10.1% in the 12 months to March 2023, down from 10.4% in February. On a monthly basis, UK CPI inflation rose by 0.8% in March, up from 1.1% in March 2022. 

While UK inflation has now slowed in four out of the last five months, it remains five times the Bank of England’s 2% target. Core inflation – which strips out volatile items such as food, energy, alcohol, and tobacco – stood at 6.2% in the year to March, unchanged from the previous month.

The slowdown in March was mainly driven by the continued fall in fuel prices. However, this was largely offset by rising food prices. 

The annual inflation rate for transport slowed to 1.0% in March, from 3.1% in February, the ninth successive fall from the recent peak of 15.2% in June 2022, and the lowest rate since November 2020. Fuel prices fell by 5.9% in the year to March, compared with a rise of 4.6% in February. Petrol prices fell by 1.2p per litre between February and March, compared with a rise of 12.6p per litre between the same two months a year ago, after Russia invaded Ukraine. Similarly, diesel prices fell by 3p per litre this year, compared with a rise of 18.8p per litre a year ago.

The slowing in the headline rate was partially offset by an upward effect from food and non-alcoholic beverages, where prices rose by 19.2% in the year to March, up from 18.2% in February to the highest rate for over 45 years. This increase was driven by price rises in five of the 11 detailed classes. The largest upward effect came from bread and cereals, where the annual rate was 19.4% in the year to March 2023, the highest rate on record. 

Responding to the latest UK inflation figures, Suren Thiru, Economies Director for ICAEW, says: “Although still astronomical, this drop suggests inflation has resumed its descending trajectory with falling energy prices dragging down the headline rate.

“March’s decline should be followed by a bigger drop in April due to strong base effects caused by the comparison with April 2022, when Ofgem increased the energy price cap by 54%.

“While core inflation is likely to prove more stubborn, the squeeze on consumer demand from rising taxes and the lagged impact of raising interest rates should put it on course for a firm downward path by the autumn. 

“This drop in inflation and the prospect of further falls may drive a bigger split in Monetary Policy Committee voting in May as concerns grow over a flatlining economy.”

For further information, read the ONS Consumer price inflation.


A closer look at the impact of inflation on people, businesses, accountancy and the wider economy, bringing together the best expert opinion, data and analysis from ICAEW and its members.

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