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Inflation dropping to 2.6% in March "will all but seal the deal on a May rate cut"

ended 16. April 2025

The Consumer Prices Index (CPI) rose by 2.6% in the 12 months to March 2025, down from 2.8% in the 12 months to February, the ONS revealed today. The largest downward contributions to the monthly change in both CPIH and CPI annual rates came from recreation and culture, and motor fuels, with a further large downward effect in CPIH from housing and household services; the largest, partially offsetting, upward contribution came from clothing. Newspage asked financial services experts and economists for their views, below.

 

15 responses from the Newspage community

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Michelle Lawson
Director at Lawson Financial
This fall in inflation could be short-lived as it doesn’t take into account the rise in wages from the Chancellor's budget. Though this is welcome news, it's not a real celebration quite yet.
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Bob Singh
Founder at Chess Mortgages
Inflation fell faster than forecast in the year to March to 2.6%. This drop is expected to be short-lived as the higher prices in April could reverse the trend. This will make the Bank of England’s job slightly harder and just a 0.25% cut in base rate is now likely. Lenders have cut interest rates in the last few weeks in anticipation of a rate cut. With inflation expected to rise to 3.7% by year end, any rate cuts could be reversed or further delayed.
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Rohit Kohli
Director at The Mortgage Stop
This latest fall in inflation will all but seal the deal on a May rate cut. With CPI now at 2.6% and core inflation slowly heading in the right direction, the Bank of England is rapidly running out of excuses to keep rates where they are. The impact of ongoing trade wars and weakening demand across key sectors is already biting UK businesses. Holding rates at these levels for much longer risks doing more harm than good. A cut next month would give firms some much-needed breathing space—and offer borrowers some more relief as they roll off fixed deals in the summer.
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Adam Stiles
Managing Director at Helix Financial Partners
This is really exciting news, especially for borrowers. One of the key contributing factors to the Bank of England holding base rate at the last MPC meeting was inflation. With this dropping more than expected, a base rate cut at the next meeting looks even more likely. All eyes will be focused on the SWAP markets in the lead up to the May Bank of England rate decision.
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Harry Mills
Director at Oku Markets
The UK inflation rate eased to 2.6% in March, a greater fall than the 2.8% forecast. That's now two months of declines from January's surprise spike to 3%, but crucially, these data are before the effects of April's tax rises and any tariff-related inflationary effects. So, whilst this is objectively good news for the economy, the government and the Bank of England, we can't look at this trend continuing lower with any degree of certainty given the inflationary headwinds we face. The Bank of England is expected to cut interest rates to 4.25% at its next meeting on the 8th of May, and a further two quarter-point cuts are pencilled in by year-end, taking Bank Rate to 3.75%.
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Ben Perks
Managing Director at Orchard Financial Advisers
It's time for the Bank of England to get the scissors out. There's surely no other option but to cut now — the question is, by how much? Could we now be looking at a 0.5% trim? This is great news for borrowers and it’ll be great to see how swap rates and lenders react this morning.
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Riz Malik
Independent Financial Adviser at R3 Wealth
This solidifies the case for a base rate cut early next month. However, the Bank of England may be fearful that this fall in inflation may be temporary, halting any reduction greater than 0.25%. With rising energy costs and Trump's tariffs, future increases in inflation are likely.
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David Stirling
Independent Financial Adviser at Mint Wealth
While these figures may not warrant celebration just yet, they should prompt the Monetary Policy Committee on Threadneedle Street to seriously consider cutting the Bank of England base rate. With global markets still unsettled by the lingering impact of Trump’s tariff threats, a reduction of at least 0.25% seems not only likely but necessary. Such a move would likely encourage lenders to continue the trend of rate cuts and relaxed lending criteria we’ve seen emerging this week.
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Emma Jones
Managing Director at Whenthebanksaysno.co.uk
Well, some things aren’t certain but surely a base rate cut is? How exciting for the buyers feeling they have just missed out with the stamp duty changes to be potentially coming away with lower rates on their mortgage! Exciting.
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Justin Moy
Managing Director at EHF Mortgages
This might be enough ammunition for the MPC to rubber stamp a base rate cut, but inflation is very likely to increase over the coming months once the multitude of tax increases hit our pockets, so any benefit may be short-lived.
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Harry Goodliffe
Director at HTG Mortgages
Inflation falling to 2.6% is exactly what the Bank of England wanted to see. It strengthens the case for a May rate cut and gives the market some breathing room. Lenders have already started cutting rates, and this latest data will only encourage more of the same. If the trend continues, we could be seeing a good few rate cuts this year — and that’s been a long time coming for buyers.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
The government would be wise to keep the champagne on ice. Whilst this inflation figure is lower than expected, it’s still far above the 2% target and expected to rise sharply from next month once the impacts of the national insurance hikes start to filter through to increased prices.
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Scott Gallacher
Director at Rowley Turton
Inflation falling to 2.6% is good news, but I doubt it’ll last. Strong wage growth and the rise in employer National Insurance are pushing up business costs, and that pressure will likely feed through to prices. Add in global risks like Sony’s price hikes due to Trump-era tariffs, and inflation could easily bounce back.

Rather than betting on imminent rate cuts, investors and households should brace for a bumpy ride ahead.
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Kundan Bhaduri
Entrepreneur, Investor and Landlord at The Kushman Group
Britain’s property market is currently the Hulk Hogan of economics – shrugging off 5.4% mortgages like spitballs, with asking prices hitting a bonkers £377k. Meanwhile, the high street feels more like Bargain Bin Ben, limping through a “spring slump” with the energy of a haggis after Burns Night. Reeves’ masterplan is to tax shops to fund homes, admittedly a strategy as logical as using a flamethrower to frost a cake. “Growth” meant £5bn in stealth taxes (thanks, April!) while pretending a north-south property rift fixes itself. On another note, US investors, smelling blood in the Thames, are swarming “bargain” zones like Peckham. Meanwhile, M&S’s Percy Pigs now cost more than a London parking permit. Priorities! If Reeves thinks taxing Pret to fund 3D-printed eco-homes is “levelling up”, we’re all moving to Mars (Musk allowing that is).
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Hannah Bashford
Director at Model Financial Solutions
This inflation data should mean a base rate cut is signed, sealed and delivered, which would be positive for borrowers, but before we celebrate we need to remember the MPC have taken a wait and see approach lately and they may be cautious of cutting rates too soon before the full effects of the budget have taken effect.