UK inflation readings were better than expected, paving the way for a potential Bank of England rate cut at the next monetary policy committee meeting in early May.
The consumer price index rose 0.3% month-on-month in March, easing down from 0.4% the previous month.
This meant CPI rose 2.6% year-on-year, softening from 2.8% the prior month and below the 2.7% average economist forecast.
Core CPI, which excludes more volatile prices such as fuel and food, also softened to 3.4% from 3.5%, which was expected. On a monthly basis, core CPI was up 0.3%, a big drop from 0.6% in February.
Services sector CPI, a key BoE reading, came in at 4.7%, down from 5.0% previously and below the 4.8% consensus.
But some economists pointed to the persistence of UK inflation, with underlying services inflation rose 4.5% year-over-year, the same as in February, and by 4.6% three-months-on-three-months annualised, up from 4.1% in February.
ONS chief economist Grant Fitzner said: "Inflation eased again in March, driven by a variety of factors including falling fuel prices and unchanged food costs compared with the price rises we saw this time last year.
"The only significant offset came from the price of clothes, which rose strongly this month, following the unusual decrease in February."
Other economists said that inflation is set to face different factors in April and beyond, including upwards pressure from domestic factors and from US tariffs, while oil prices have eased off.
Monica George Michail from the National Institute of Economic and Social Research, said : "In the coming months, increased public spending and persistent wage growth is likely to drive inflation upwards, although the recent fall in oil prices will exert some downward pressure.
"Nevertheless, we forecast CPI inflation to remain above the Bank of England’s 2% target for the rest of 2025, with the Bank's decision to further cut rates more than once this year on a knife-edge."
Rob Wood at Pantheon Macroeconomics said the persistence of the underlying services inflation cut "through the noise" to show that "underlying inflation pressure remains stubborn".
He added: "But the MPC has to set policy based on the balance of risks in the medium term as well as the central case. ‘Liberation Day’ has created a much worse worst-case growth scenario than the MPC had to contend with before.
"Accordingly, the MPC can afford an extra precautionary rate cut this year, so we look for three more reductions in 2025, compared to two before Mr Trump’s interventions."
"It's a finely balanced call," he says, "highly sensitive to President Trump’s actions, the dataflow and the MPC’s comments", as he looks for back-to-back 25bps cuts in May and June, with another cut in November.
Nathaniel Casey, investment strategist at Evelyn Partners, says: "Despite the lower-than-expected annual reading for March, the UK continues to face stickier inflationary pressures compared with other advanced economies. This has been reflected in the bond market, with gilt yields remaining significantly higher than their European counterparts such as German bunds, even as both markets face a similarly weak growth profile.
He notes that President Trump’s tariffs also bring further inflation concerns if they do persist at a rate of 10% for the UK.
"While the BoE is yet to deliver an interest rate cut this year, we expect the growth risks will outweigh the inflation concerns and the bank will soon cautiously resume their cutting cycle," Casey added.
Markets are currently expecting the next rate cut to be delivered at the next meeting, on 8 May.
** Update: Adds comments from economists **