UK inflation eases less than expected to 3.2% in March

Inflation in the U.K. eased to 3.2% in March, the Office for National Statistics said on Wednesday.

That was slightly higher than the forecast of economists polled by Reuters of 3.1%, but was down from 3.4% in February.

The core figure, excluding energy, food, alcohol and tobacco, came in at 4.2%, compared with a forecast of 4.1%.

This week, investors have been monitoring signs of a cooling U.K. labor market, with unemployment unexpectedly rising to 4.2% in the period between December and February. Wage growth excluding bonuses meanwhile dipped from 6.1% in January to 6% in February.

Bank of England Governor Andrew Bailey on Tuesday said he saw “strong evidence” that higher interest rates were working to tame the rate of price rises, which has cooled from a peak of 11.1% in October 2022. The central bank’s own forecast is for inflation to “briefly drop” to its 2% target in the spring before increasing slightly.

Market pricing currently suggests the BOE will implement two interest rate cuts in 2024 from its current rate of 5.25%, starting in August or September. Market uncertainty over this timeline has now increased, given signs of continued inflationary pressures in the U.S.

This is a breaking news story and will be updated shortly.