Inflation rose by less than expected in March, raising hopes that the Bank of England’s Monetary Policy Committee may vote to cut the base rate at their next meeting in May.
The Consumer Prices Index (CPI), which is the Government’s preferred measure of inflation, fell from 2.8% to 2.6% in the 12 months to March, whilst the Retail Prices Index (RPI) fell from 4% to 3.6%, according to the Office for National Statistics. The slowing of inflation was predominantly due to falling motor fuel costs, the ONS said.
Both the CPI and RPI factor in the prices of consumer goods we spend our money on, such as food, drink, and going out, but the RPI includes housing costs such as mortgage interest payments and council tax, whereas CPI does not.
With inflation currently showing signs of cooling, markets expect the Bank of England to reduce interest rates in May, with some commentators predicting that we could now see three rather two cuts this year. However with ongoing uncertainty and market volatility following President Trump’s decision to impose tariffs on imports into the US, there are no guarantees.
Many expect inflation to rise again next month, following a series of bill increases in April. These include an increase in the energy price cap, steeper Council Tax and water bills, and higher TV licence and road tax costs. The Bank of England expects headline CPI inflation to increase to 3.7% later this year, before it starts to ease again next year.
Given inflationary risks, it makes sense to take advantage of low mortgage rates while they’re available. With L&C’s Rate Check service, your chosen lender's rates will be checked automatically after about four weeks, and you’ll be notified if there’s a better deal that you could transfer to. This can provide valuable peace of mind that you’ve secured a competitive rate, but it also that if rates reduce further, you’ll be able to take advantage of lower rates.
