KONTAN.CO.ID - LONDON. British consumer price inflation slowed by less than expected to a two-and-a-half-year low of 3.2% in annual terms in March, down from a 3.4% increase in February, the Office for National Statistics said on Wednesday.

The Bank of England - which has an inflation target of 2% - and economists polled by Reuters had forecast an annual rate of 3.1%.

"Headline inflation took another small step on the path back to target," Jake Finney, an economist at PwC UK, said, adding pressure would grow on the BoE to cut interest rates if inflation continued to fall.

"However, the Bank is likely to want more conclusive evidence that we have achieved a sustainable return to target before they pivot to rate cuts."

The slowdown in Britain's inflation rate contrasts with an acceleration of headline price growth in the United States which rose for a second month in a row to 3.5%, according to data published last week.

Sterling rose against the dollar and euro immediately after the figures were published.

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Core inflation, which excludes energy, food and tobacco prices, also slowed to 4.2% from 4.5% in February. The Reuters poll had pointed to a reading of 4.1%.

Services inflation, which the BoE also watches closely, eased slightly to 6.0% from 6.1%, the ONS said.

The ONS said a slowdown in food prices was the main contributor to the decrease in headline inflation.

The prices of food and non-alcoholic beverages increased by 4% over the 12 months to March, their weakest increase since November 2021.

"Once again, food prices were the main reason for the fall, with prices rising by less than we saw a year ago," ONS chief economist Grant Fitzner, said.

"Similarly to last month, we saw a partial offset from rising fuel prices."

Editor: Wahyu T.Rahmawati