Don’t expect Bank to go large with interest rate cuts

Price rises eased again in March raising a question which has borrowers on tenterhooks: Could the Bank of England go big at its next meeting?

- JAMES MOORE

The official rate of inflation in March fell from 2.8 per cent to 2.6 per cent, with the Consumer Prices Index (CPI) undershooting economists forecasts (2.7 per cent) – just as it did in February.

A deeper dive into the numbers offers further comfort for the Bank’s rate-setting Monetary Policy Committee (MPC). The longtime bogeyman – service prices – also undershot expectations, falling to 4.7 per cent from 5 per cent. That is still too high. But the decline is very welcome. Core inflation – which excludes volatile energy, food prices and tobacco – eased to 3.4 per cent from 3.5 per cent.

Again, that figure will discomfort monetary policymakers, because it is too high. But the downward move is welcome. Big drivers included toys and games – computer games, in particular – and petrol prices. Food price rises mercifully eased to 3 per cent from 3.3 per cent and the start of a supermarket price war should further help.

Donald Trump’s tariffs and trade war inevitably loom over the future pathway for prices. These will take out some of the life that the UK economy, which got a boost from manufacturers rushing to beat the US levies, showed in February.

Make no mistake, they will hurt but should also ease overall inflationary pressures. Keir Starmer’s cautious response when it comes to retaliation also helps. Reciprocal tariffs on US goods will inevitably be passed on to British consumers.