Inflation drops to lowest rate in two-and-a-half years

The rate of inflation has dropped – down from 3.4% in February to 3.2% in March.

The new figure is the lowest annual rate for two-and-a-half years, with the price of food rising less quickly.

Grant Fitzner, chief economist at the Office for National Statistics, said: “Once again, food prices were the main reason for the fall, with prices rising by less than we saw a year ago.

“Similarly to last month, we saw a partial offset from rising fuel prices.”

Meanwhile, the cost of raw materials fell by 2.5% and the cost of goods leaving factories rose by 0.6%.”

Chancellor Jeremy Hunt said: “The plan is working: inflation is falling faster than expected, down from over 11% to 3.2%, the lowest level in nearly two and a half years, helping people’s money go further.

“This welcome news comes on top of our cuts to national insurance, which save the average worker £900 a year, so people should start to feel the difference as well as see it in their pay cheques.”

The pressure will now be on the Bank of England to cut interest rates next month. Some analysts believe that economists at the Bank will be under pressure to cut the 5.25% rate from June as inflation spirals towards its target rate of 2% later this year.