The cost of living has eased over the last month or so, with the CPI falling to 2.5% in March, its lowest level for the year. Will it continue to fall?
The Bank of England is set to raise interest rates in May and there is much speculation about whether or not this easing will deter them from doing so or if they will be very British about it all and Keep Calm and Carry On. It is likely that we will see an interest rate rise to at least 0.75% in the next month or so, thereby giving the possibility to reduce interest rates again if necessary when we hit the next downturn. Probably a sensible move to try to get interest rates back to normality.
The fall in inflation has been attributed to a slowing in the cost increases in women’s clothing and footwear, which rose by 0.7% between February and March compared with a rise of 2% in the same period last year.
The fall in inflation and the expected interest rate rise are likely to affect exchange rates and the strength of sterling against other currencies. There was a slump in this measure, suggesting that we may be falling back into the exchange rate misery of the beginning of 2018. We hope not!