U.K. inflation slowed to the weakest level in a year in March as the Bank of England prepares to lift interest rates next month.
Consumer prices rose 2.5 percent from a year earlier, down from 2.7 percent in February, the Office for National Statistics said on Wednesday. That’s less than economists estimated. Core inflation cooled to 2.3 percent, also the lowest rate in a year.
The figures may weaken the case for more BOE interest-rate increases later this year. Policy makers are widely expected to raise the benchmark for a second time in six months at their May meeting as price gains continue to exceed the 2 percent target.
The pound tumbled after the data, sliding 0.5 percent to $1.4217 as of 9:37 a.m London time.
While a hike next month is still almost fully priced in by markets, traders are now pricing in about a 40 percent chance of a follow up in November, down from above more than 50 percent at the start of this week.
Downward momentum on inflation came for women’s clothing, which rose at a slower pace than usual for this time of year, the ONS said. Alcohol and tobacco taxes also didn’t increase as usual after the government changed the timing of its annual budget announcement to the autumn.
Producer prices eased to the lowest rate since 2016, mainly due to smaller increases in food prices, the report said. Input prices gained 4.2 percent from a year earlier in March, driven by higher crude oil costs.
The ONS’s house-price gauge showed an annual gain of 4.4 percent in February, down from 4.7 percent in January. Prices in London fell for the first time since 2009.