The Office for National Statistics (ONS) said the rate of consumer price index (CPI) inflation fell to 1.5 per cent in March, from 1.7 per cent in February.
ONS head of inflation Mike Hardie said: “The inflation rate slowed again in March, mainly due to falling prices for clothing and motor fuel. Clothing prices normally rise between February and March as new year discounting ends.
“However, this year the price of clothes has eased due to some retailers offering discounts due to decreased footfall in stores before the lockdown started. The cost of raw materials for manufacturers fell significantly over the year, driven by a global fall in the price for crude oil, which is at its lowest level since early 2016.”
Alastair Neame, senior economist at the Centre for Economics and Business Research (CEBR), said: “The March inflation data were collected ahead of the complete UK-wide lockdown but shifting consumer priorities and a collapse in demand for oil have already had an impact on prices.
“The negative prices for oil seen earlier this week are a further sign of the unprecedented economic impact of coronavirus on the global economy.”
Neil Lovatt, commercial director at Scottish Friendly, said: “Inflation hasn’t fallen as far as some may have initially predicted, but this is perhaps just the prologue to a more drastic change in April. These kinds of numbers take time to feed through the statistics and clearly the full effect of lockdown has yet to be captured.
“Experts have been obsessing over the cost of oil going negative in the last week, but we’ve been living with negative real interest rates for so long that no one even bats an eyelid any more. Low headline inflation is not a panacea for savers being gifted terrible interest rates.”
Robert Alster, head of investment services at Close Brothers Asset Management, noted: “A collapse in consumer demand combined with plummeting oil prices meant that declining inflation in March was inevitable, and is likely to continue through the duration of the Covid-19 crisis.
“The Bank of England governor has already been clear that he’s opposed to both negative rates and monetary financing. Near term, the scope of asset purchases may be widened.”
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