“Inflation could soon return to target, but risks remain” says Yael Selfin, Chief Economist at KPMG UK.
“The overall outlook for inflation remains broadly positive, however there are several risks which could cause a setback. Oil prices have rallied over the past month which has led to an increase in prices at the pump for consumers. Also, the hike in the National Living Wage could potentially contribute to persistence in services inflation which remains elevated.
“Today’s data are unlikely to move the needle for the Bank of England. We expect inflation to return to target later this spring, which raises the prospect of interest rate cuts from June onwards. Fewer rate cuts by the Fed are unlikely have a major impact given the more favourable inflation outlook and the ongoing weakness in the UK economy.
“Headline inflation continued to cool in March, falling to 3.2%, as the rate of food price increases eased further. However, services inflation remained elevated at 6%.”
