Inflation unchanged in March

Inflation remained steady in March despite concerns that February’s interest rate cut could prompt a sharp rise.

The Bank of England’s Monetary Policy Committee (MPC) had previously warned that rising food and energy prices, plus February’s interest rate cut, would cause a sharp rise in inflation. However, official figures reveal that in fact inflation remained unchanged at 2.5% in March.

Cheaper furniture and toys helped keep inflation from rising, according to the Office of National Statistics. These factors offset the rising cost of transport, gas and electricity.

The government uses the Consumer Price Index as its official figure of inflation – however, many economists argue that the Retail Price Index (RPI) is more telling as it also includes mortgage repayments.

In March, RPI fell to 3.8% down from 4.1% in February.

The Office of National Statistics says the fall was caused by cheaper mortgage interest payments as lenders passed on February’s quarter point decrease in interest rates. However, falling house prices also prompted the fall.