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<p>Britain's consumer price inflation fell to 1.8% in March, according to figures released by the Office for National Statistics — the first time in three years that the rate has dropped below the Bank of England's 2% target. For an institution that spent much of 2022 and 2023 defending its inflation-fighting credibility, the data represents a significant vindication.</p><h2>The Journey Down</h2><p>The decline from a peak of 11.1% in October 2022 to the current reading has taken over three years and involved 14 interest rate increases. The pain of that journey was distributed unevenly: mortgage holders on variable rates and those remortgaging faced dramatic payment increases; businesses borrowing at floating rates saw their financing costs rise sharply; and consumers, buffeted by energy price spikes and food inflation, experienced the most severe squeeze on real living standards in a generation.</p><h2>What Happens to Interest Rates</h2><p>The below-target inflation reading strengthens the case for further Bank of England rate cuts, following the reductions already implemented from the peak of 5.25%. Markets are currently pricing two to three further cuts in 2026, which would bring the base rate to 3.5-3.75% by year end. For the approximately 1.5 million households facing mortgage renewals this year, the prospect of lower rates provides genuine relief.</p><h2>The Remaining Risks</h2><p>Not all Monetary Policy Committee members will be celebrating. Services inflation remains elevated, driven by wage growth in sectors including hospitality, healthcare, and professional services. And the global economic environment — with significant uncertainty around US trade policy and persistent geopolitical tensions — creates risk that energy prices could rise again.</p>

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UK Inflation Hits 1.8%: Bank of England's Victory | TGBN | The Great British News

tgbnews.co.uk › article › uk-inflation-drops-to-18-the-bank-of-englands-quiet-victory

UK inflation has fallen to 1.8%, near the Bank of England's 2% target. We examine what it means for interest rates, mortgages, and the British economy.