The Financial Times report today that investors are expecting the Bank of England to delay interest rate rises after cash-strapped consumers forced supermarkets to cut prices, helping to push down inflation over the last month.
The report goes on to say that although markets have been betting on a rate rise next month, interest rates are now thought more likely to rise in the Autumn.
Consumer price inflation fell from 4.4% in February to 4% in March whilst retail price inflation fell slightly to 5.3%.
Most economists and the Bank expect inflation to rise again later in the year as petrol and other commodity prices feed through to consumers.
But the unexpected drop in inflation was the first decline since last July and came as supermarkets offered discounts on a wide range of goods in response to weaker consumer demand. Other data from the British Retail Consortium showed retail sales last month experienced the biggest fall in 16 years.
“Today’s figures will perhaps help to break the psychology that had begun to develop around UK inflation [moving] continually higher, and again suggest that some of the intended price rises suggested by business surveys and price pressures at the factory gate are proving hard to stomach across the high street,” said Stuart Green, economist at HSBC.