business

Inflation Continues Its Downward Trend

Today’s data from the Office of National Statistics, showed the headline rate of CPI inflation fall from 3.4% in February 2024 to 3.2% in March 2024.

Image by Markus Winkler from Pixabay

Dr Roger Barker, Director of Policy at the Institute of Directors, said:

“March’s inflation data confirmed that the headline inflation rate continues to fall, although perhaps less decisively than some might have expected. Although inflation in the goods sector is now running at very low rates (0.8%), service sector inflation remains stubbornly high (6.0%).

“This month’s figures revealed a significant decline in food and clothing inflation. However, inflationary pressures in sectors like alcohol and tobacco, communication and health actually increased.

“The latest data remains consistent with the prevailing narrative of gradually declining inflation towards the Bank of England’s 2% target. There is still some way to go before inflationary pressures are squeezed out of some sectors of the economy. Nonetheless, the trend is clear and the case for a cut in Bank Rate by the Bank of England at the next meeting of the Monetary Policy Committee on 9 May remains intact.”

Alpesh Paleja, CBI Lead Economist, said:

“While March’s fall in inflation was smaller than expected, it’s still likely to move closer to the Bank of England’s 2% target in the next few months. But the path beyond this will be bumpy – the CPI rate is likely to rise again in the second half of 2024, thanks to base effects from energy prices.

“The Bank of England will look through these ups and downs, so it’s still likely that they will cut interest rates this summer. But it’s notable that inflation is now higher than the Bank expected, and in view of this they will also be keeping one eye on the resilience in pay growth. Recent developments in the Middle East could also slow the path of inflation back down, if they feed through to higher global energy prices.  

“Therefore, while it’s reasonable to expect some loosening in monetary policy ahead, this is by no means a done deal.”

Sam Martin, CEO of Peckwater Brands, said:
“All entrepreneurs will welcome today’s drop with open arms. Businesses have been grappling with rising costs for too long and a more stable economic environment means a better playing field for startups.

“Nothing about the past two years has been easy for UK startups – the high-inflation, high-interest landscape has led to decreased consumer activity, stagnant investment, and a general lack of momentum across almost all sectors. Every time I hear inflation has fallen even a fraction of a percent, it’s music to my ears.

“In order for British businesses to innovate and expand their ventures, we need greater investment into startups and into scaling our enterprises, and inflation falling should be conducive to increasing investor interest in our best and brightest – especially if that decline is coupled with falling interest rates in the near future.”