Image source, Getty Images

A drop in fuel prices helped drive down UK inflation by more than expected in the year to March.

Prices increased by 2.6% in the year to March, falling for the second month in a row. Culture and recreation activities were another contributing factor for the drop with toys, games, and hobbies falling particularly sharply, according to the Office for National Statistics (ONS).

"The only significant offset came from the price of clothes which rose strongly this month," Grant Fitzner, chief economist at the ONS, says.

For petrol, the average price fell by 1.6p per litre between February and March to 137.5p per litre.

The inflation rate drop is an encouraging sign, Chancellor Rachel Reeves says, whilst acknowledging that there's "more to be done".

Analysts have warned that the fall may only be temporary as a spike is expected from April due to rising bills and higher business costs.

Shadow chancellor Mel Stride accused the Labour government of making policy choices that are "keeping inflation higher for longer".

We're wrapping up our live coverage but you can check out the latest updates in our story.

Kevin Peachey
Cost of living correspondent

Image source, Getty Images

This is a bit of a technical nugget, but it may offer a positive outlook for anyone looking for a new mortgage deal - whether a renewal or for a first home.

The yield on two-year UK gilts has dropped to 3.89% today, the lowest since mid-September last year. In other words, the return on a type of government bond (or IOU) is falling.

Why is that important? Well, it influences the pricing of home loans and could signal a fall in those mortgage interest rates.

Some lenders have been dropping their rates since last week on new fixed deals. Brokers say it is worth planning ahead, months before a renewal date, to ensure you don't get caught out if rates head back up.

Betting on rates falling is risky, they say, and - even if you agree to a new deal early - you can usually switch to a cheaper product if rates continue to fall before your old deal expires.

Kevin Peachey
Cost of living correspondent

Image source, Getty Images

We've all become even more accustomed to facing the rising cost of living in recent years.

So many practical steps now feel a bit like teaching your grandma to suck eggs (or should that be Easter eggs this week?).

But money experts say it is still a good idea to regularly go through your finances, check for any unwanted or unneeded subscriptions, be honest about whether you are using - for example - a gym membership, and consider where you can cut back any further.

If interest rates do start to fall, they say it is even more important to find as lucrative a home as possible for any savings you have. Perhaps that means locking them away for longer, for a better rate, if that suits your circumstances.

And, if you don't have any savings, then they urge you to try to build up an emergency fund. It will prove cheaper than borrowing money to deal with those surprise costs that life inevitably throws up.

Marc Ashdown
Business correspondent

Today’s inflation figures suggest households are getting some relief from years of rising costs, but are saving a few pennies for what could be a difficult few months ahead.

The price we’re paying at the petrol pumps has been noticeably cheaper in recent weeks, and with crude oil trading at its lowest price this year, motoring groups are expecting a further significant drop as we head into Easter.

Food costs have stabilised as well compared to a year ago, making the weekly shop a little easier to digest.

But going by a slowing in price rises in the culture and leisure sector, it seems fewer people have the appetite to splash out on a night out to the pub, restaurant, or cinema.

And the start of April saw a raft of household bill rises land on doormats, with calculators broken out across the land to do the sums yet again on rising monthly outgoings.

Although a rise in the minimum wage has boosted earnings for three million people, many seem to be adopting a prudent approach ahead of the summer.

Inflation is also predicted to rise back above 3% over the next few months, as prices for households and businesses creep up again.

But interestingly some economists now think the shock from Donald Trump’s tariffs could help ease inflation – and if they weaken the economy, it could lead to speedier cuts to interest rates.

Image source, PA Media

A former Bank of England interest rate setter is cautioning that today's rate drop is the "calm before the storm".

Speaking to BBC's Radio 4's Today programme, Michael Saunders outlines several factors that he says will likely lift April's inflation figures above 3%. These include:

• An increase in gas and electricity prices
• A rise in water charges
• National Minimum Wage and National Living Wage going up
• An increase in National Insurance for employers kicking in
• And Donald Trump's global tariffs

But it isn't all doom and gloom. Saunders also says:

• The UK might benefit from cheaper exports (which would've otherwise gone to the US)
• Oil prices are continuing to fall

Both of these factors, Saunders notes, should allow the Bank to continue to cut interest rates in the coming months.

Kevin Peachey
Cost of living correspondent

The rate of price rises is now nothing like the 11% we saw in 2022, as the cost of living soared.

But it may feel that it isn't getting any easier to manage the household budget, even when price rises have slowed so much since then. Charities say "the reality feels very different" to a falling inflation rate.

Why so?

Firstly, prices haven't fallen, it is just that they are rising more slowly.

Secondly, we've all witnessed a string of increases to bills in April, and that won't be reflected until the next inflation data is published in May.

And thirdly, we all have our own personal inflation rate. For example, if you don't drive, then falling petrol prices may have little benefit for you.

Image source, Getty Images

When inflation rises above the 2% target set by the Bank of England, the Bank can then decide to increase interest rates.

With March's inflation rate being just above that target, it's possible we could see an interest rate cut in May, our cost of living correspondent writes.

The idea is that if you make borrowing more expensive, people have less money to spend. People may also be encouraged to save more.

In turn, this reduces demand for goods and slows price rises.

But it's a balancing act - increasing borrowing costs risks harming the economy.

For example, homeowners face higher mortgage repayments, which can outweigh better savings deals.

Businesses also borrow less, making them less likely to create jobs. Some may cut staff and reduce investment.

The latest inflation figures are out - and have nudged down slightly for the second month in a row.

We want to hear from you and find out: what are your cost of living priorities and concerns?

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Tommy Lumby
Business data journalist

The Bank of England’s interest rate stands at 4.5%, after rate setters lowered it from 4.75% on 6 February and then kept it there at their latest meeting in March.

As the chart shows, interest rates have been creeping down since last summer after hitting 5.25% in August 2023.

The Bank spent most of 2022 and 2023 raising rates to try to dampen down inflation.

The basic idea is that making borrowing more expensive lowers demand for goods and services, so prices will drop in response.

Higher savings rates can also encourage people to put more money in the piggy bank rather than spend it.

This process could now go further into reserve as the economic uncertainty caused by Trump's trade tariffs might take more momentum out of the economy than the Bank wants.

Markets are now predicting that rates could be cut further and faster in an effort to stimulate economic activity.

Kevin Peachey
Cost of living correspondent

An inflation rate of 2.6% may still be above the Bank of England's target of 2% - but only just.

These figures, as well as jobs and wages data released yesterday, will all be considered by the Bank's policymakers when deciding whether to cut the cost of borrowing - interest rates - on 8 May.

But, of course, these can't be taken in isolation. There's the expectation of a sharp rise in inflation next month, and the huge upheaval on the world economy brought by regular changes to US tariffs policy.

Analysts expect more interest rate cuts this year, but even May still seems a long way away in the current climate to start making confident predictions.

Image source, PA Media

Inflation remains above target and are "set to increase further this year because of the chancellor's choices", says shadow chancellor Mel Stride reacting to this morning's announcement from the ONS.

The Tory MP says his party left office "with inflation bang on target", as price rises slowed in the year to May 2024 to meet the Bank of England's target of 2%.

Referring to Chancellor Rachel Reeves's policies, and latest announcements in the Spring Statement, Stride says her "reckless union payouts, tax hikes and borrowing binge is driving up the cost of living".

In his view, the Labour government's policies are "keeping inflation higher for longer", but Reeves says the latest figures are an "encouraging sign".

Image source, Getty Images

UK Chancellor Rachel Reeves says the news of inflation falling for a second month in a row is a "sign" that the government's plan is working.

Reacting to March's 2.6% inflation rate, Reeves says "wages growing faster than prices and positive growth figures" are encouraging but adds that there's "more to be done".

"I know many families are still struggling with the cost of living and this is an anxious time because of a changing world," she says.

"That is why the government has boosted pay for three million people by increasing the minimum wage, frozen fuel duty and begun rolling out free breakfast clubs in primary schools."

One of the main factors driving inflation down in the year to March was recreation and culture activities, as price rises for activities falling under that umbrella slowed to 2.4%.

The previous month, in the year to February, it was 3.4%.

The Office for National Statistics (ONS) says other goods and services, such as petrol prices and housing and household services also contributed to slowing down price rises.

But the price for clothes "rose strongly", Grant Fitzner, chief economist at the ONS says. It comes one month after an "unusual" decrease in the year to February.

Kevin Peachey
Cost of living correspondent

The inflation rate tells us how quickly prices are rising, and reflects what we all see in our bills, the cost of our weekly shop, daily commute and so on.

Workers will want their wage rises to at least keep up with inflation, and exceed it to improve how much they can buy.

Policymakers will keep an eye on it, to set the cost of borrowing - affecting the cost of our loans, mortgages, and what we get in interest on savings.

These latest figures show price rises were relatively steady in March, with petrol prices down and food costs unchanged.

But, as we all know, bills went up in April, so analysts expect the inflation rate to head northwards when that impact comes into play in the data published next month.

Faarea Masud
Business reporter

Image source, Getty Images

Falling petrol prices drove UK inflation down by more than expected in the year to March.

Inflation was 2.6%, down from a rate of 2.8% in February.

But the fall may only be temporary as analysts say it's expected to spike from July as rising bills and higher business costs take hold.

Inflation slowed to 2.6% in the year to March, according to the Office for National Statistics.

It marks the second month in a row that the rate at which prices are rising has eased.

Adam Wood
BBC Breakfast producer

Sonja says the biggest cost for her business is staffing – and that’s about to rise with minimum wage increases.

The recent increase in National Insurance (as our last post just discussed) has cost her over £60,000.

“And it’s getting higher and higher,” she says – although she’s happy to pay it as it helps improve the UK’s infrastructure.

Her firm, West Special Fasteners, has been making nuts and bolts since 1999. It employs over 65 people and supplies offshore defence and specialist construction firms with non-standard fasteners made from stainless steel and exotic metals.

She says one material, Hastelloy C-276, has jumped from £30 to £50 a kilo in just five years.

As her firm uses a lot of energy, the rising cost has also “really impacted” her.

“We’re trying to be a little bit more efficient, so we’re trying to improve all our processes, because that can help claw some of that money back.”

But if she can’t absorb the extra costs, prices will have to go up.

Inflation expected to dip slightly before heading back uppublished at 06:41 British Summer Time

06:41 BST

Marc Ashdown
Business correspondent

Inflation may have cooled from its red hot 11.1% in October 2022 - but the pace of price rises remains stubbornly above the Bank of England's target of 2%.

Economists expect the March figure we’ll get shortly will show a tiny drop from the previous month to around 2.7%. But they think the rate will tick up again to around 3% over the coming months, and peak at around the 3.7% mark in the autumn.

That’s because a raft of household bills went up this month and businesses are feeling the pinch from extra costs.

Their energy costs have gone up, so too has the price of raw materials. The main pressure is coming from extra staffing costs, however, after increases in the minimum wage and employer National Insurance contributions.

The volatility around global trade could also stoke further price rises.

Some respite could come from the price of fuel. Motorists have seen an average of 4p per litre cut from the price of petrol and diesel in recent weeks.

And with crude oil trading at around $10 (£7.6) a barrel lower than at the start of the year, the RAC motoring group told us it is expecting a further significant fall in prices at the pumps.

All this will feed into the Bank of England’s calculations. Its Monetary Policy Committee is expected to cut interest rates in May, with up to three more cuts possible by the end of the year.

The necessity to put money into the pockets of households and businesses to get the economy firing is outweighing concerns that the pace of price rises could heat up once more.

Image source, Getty Images

Inflation is a measure of how quickly prices are rising (or very occasionally falling) for goods and services.

A good example of this is if a bottle of milk costs £1 but is £1.05 a year later, then annual milk inflation is 5%.

A series of shocks to the economy over recent years has caused high inflation, the Bank of England says.

First, the Covid pandemic pushed prices up as more people bought goods - but there were problems getting enough of the goods, particularly with importing them from abroad.

Second, the war in Ukraine led to large increases in the price of gas and food.

Then, a big fall in the number of people available to work meant employers began offering higher wages to job applicants, with many businesses increasing their prices to cover these costs.

It is important to understand that things will continue to cost more than they did before, even if the rate of inflation falls.

• Continue reading about inflation

Tommy Lumby
Business data journalist

Prices rose by 2.8% in the year to February 2025. That was above the Bank of England’s 2% target, but was slightly less than some economists had predicted.

March’s figure, to be released at 07:00 BST, is expected to be a shade lower at 2.7%. But the data for March will not capture the aftermath of US President Trump’s “liberation day” trade tariffs announced to the world on 2 April, and those imposed by other countries in response.

These import taxes will make many goods traded around the world more expensive, although it’s hard to know exactly how the situations will play out.

Even before Trump unleashed his tariffs, official forecasters had upgraded their best guess for inflation in 2025 as a whole, partly driven by higher-than-expected energy prices.