The UK's Consumer Price Index (CPI) in March 2025 is set to print a small downward inflation rate, with the year-on-year headline rate declining to 2.7% from 2.8% in February. The monthly CPI inflation is anticipated to rise by 0.4%, the same as in February. Core CPI, which does not account for volatile items, is set to print at 3.5% year-on-year. Yet, certain analysts expect a marginal fall in core inflation to about 3.3%, driven by an expected moderation of service sector inflation from 5.0% to about 4.7-4.8%.
Even with the expected moderation, inflation is still likely to be over the Bank of England's target of 2.0%. This retains monetary policy thinking in the forefront, and will likely impact on market expectations over future Bank of England action. In particular, there is hope for possible cuts in interest rates at the Monetary Policy Committee in May, with the modest decrease in headline inflation giving the BoE some wiggle room.
Yet, it is also forecasted that inflation will pick up again towards the latter part of the year, with the possibility of rising to approximately 3.6% in April and 3.75% in the third quarter on the back of rising energy prices. The Office for National Statistics will publish the March CPI data today, which is likely to lead to market volatility, particularly for the Pound Sterling, as investors weigh up the implications for the UK's economic prospects and monetary policy
