UK's inflation drop to 3.2%: what does it mean for your wallet, impact on household budgets and everyday expenses

Inflation in the UK slowed once more last month, which could help low-income households all around the country.

Official figures from the Office for National Statistics (ONS) showed Consumer Prices Index inflation stood at 3.2% in March, down from 3.4% in February. However, it still means that prices are rising at a faster rate than the government’s recognised target rate of 2%.

It denotes a significant decline in inflation, which peaked in 2022 at 11.1% and sparked several abrupt rate increases by the Bank of England. Broadly, most economists expect inflation to continue to slow over the coming months.

Thomas Pugh, UK economist at RSM, said “inflation is likely to fall to around 2% in April before lurching below that in May”.

However, the Bank of England and Office for Budget Responsibility’s most recent forecasts have both projected that it will plateau in early summer before moving slightly higher later in the year.

Read more: What is the UK inflation rate 2024?

It also comes amid warnings from the International Monetary Fund (IMF) that the escalation of conflict in the Middle East risks pushing up food and energy prices across the world.

But what does the latest fall in inflation mean for families across the country, and will it result in a lowering of prices on everyday goods? Here is everything you need to know.

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Why is inflation falling?

Inflation has been steadily easing after hitting a peak of 11.1% in October 2022. This is largely due to the significantly lower energy price cap compared with the eye-watering £2,500 limit seen at the end of 2022.

March’s inflation rate of 3.2% means that the things that cost a household £100 a year ago now cost £103.20. The fall of inflation was slightly less than expected, with economists having predicted it would hit 3.1% for the month.

Does it mean things are getting cheaper?

Regretfully, no. Falling inflation simply indicates that the rate of price increases is slowing down, not that prices themselves are falling.

Fuel is broadly cheaper than a year ago but has ticked higher in recent months, with the price of petrol up 2.6p per litre between February and March 2024 to stand at 144.8p per litre. Increases in the cost of health services and communication were also higher in March.

That being said, some everyday items have seen prices fall. The ONS said on Wednesday (17 April) that some food items have seen price decreases, such as meat, which was cheaper in March than it was in February.

Meanwhile, some consumer items also saw increases. Alcohol and tobacco prices were up 12.1% for March, rising from an inflation rate of 11.9% the previous month.

Energy is the main area which is down notably year-on-year, and is due to fall further in April as the new price cap comes into force.

The price of furniture and other household goods has also dropped, down 0.9% against March last year. Housing costs also dropped, according to the figures.