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12 April 2011
Last updated at 05:01 ET
The UK Consumer Prices Index (CPI) annual rate of inflation has fallen to 4%, down from 4.4% in February.
The drop was largely due a record monthly fall in the price of food and non-alcoholic drinks, which fell 1.4%, compared with a sharp rise last year.
Retail Prices Index (RPI) inflation - which includes mortgage interest payments - fell to 5.3% from 5.5% in February.
The fall eases pressure on the Bank of England to raise interest rates.
The Office of National Statistics (ONS) said fruit prices fell by 4.7%, while bread and cereals dropped by a record 2.6% when compared with March last year.
Falls in the price of air flights, games and toys also helped to offset rises in energy costs and cars, it added.
Interest rates Economists had expected the CPI rate to stay at 4.4%, or perhaps even rise slightly.
But although lower than their expectations, inflation is still twice the Bank of England's target rate of 2%, and has now been one percentage point or more above target for 16 months.
This has led to calls for the Bank to raise interest rates - the policy tool seen as most effective in combating rising prices.
Last week, the Bank's Monetary Policy Committee (MPC) kept rates at a record low of 0.5% for the 25th month in a row.
Next week it will reveal how members voted.
Members disagree Last month three of the MPC members called for a rise in rates.
They and some other economists have argued that rates must rise in order to combat rising prices, which are eroding consumers' spending power.
Those members that voted for rates to be held, backed by a number of leading economists and business groups, argue that a rise in rates could jeopardise the UK's fragile economic recovery, particularly in light of the economy's 0.5% contraction in the final three months of last year.
They say that inflation is high due to temporary and external factors, such as the recent rise in VAT and high commodity prices, and has yet to be reflected in wage increases, which would provide longer-term upward pressure on prices.
The rise in VAT came into effect in January, and so will fall out of the inflation calculations at the beginning of next year.
They insist, therefore, that, given time, inflation will fall away of its own accord, without the need to raise rates in the short term.
The latest ONS figures could strengthen their resolve to keep rates on hold for longer.
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The drop was largely due a record monthly fall in the price of food and non-alcoholic drinks, which fell 1.4%, compared with a sharp rise last year.
Retail Prices Index (RPI) inflation - which includes mortgage interest payments - fell to 5.3% from 5.5% in February.
The fall eases pressure on the Bank of England to raise interest rates.
The Office of National Statistics (ONS) said fruit prices fell by 4.7%, while bread and cereals dropped by a record 2.6% when compared with March last year.
Falls in the price of air flights, games and toys also helped to offset rises in energy costs and cars, it added.
Interest rates Economists had expected the CPI rate to stay at 4.4%, or perhaps even rise slightly.
But although lower than their expectations, inflation is still twice the Bank of England's target rate of 2%, and has now been one percentage point or more above target for 16 months.
This has led to calls for the Bank to raise interest rates - the policy tool seen as most effective in combating rising prices.
Last week, the Bank's Monetary Policy Committee (MPC) kept rates at a record low of 0.5% for the 25th month in a row.
Next week it will reveal how members voted.
Members disagree Last month three of the MPC members called for a rise in rates.
They and some other economists have argued that rates must rise in order to combat rising prices, which are eroding consumers' spending power.
Those members that voted for rates to be held, backed by a number of leading economists and business groups, argue that a rise in rates could jeopardise the UK's fragile economic recovery, particularly in light of the economy's 0.5% contraction in the final three months of last year.
They say that inflation is high due to temporary and external factors, such as the recent rise in VAT and high commodity prices, and has yet to be reflected in wage increases, which would provide longer-term upward pressure on prices.
The rise in VAT came into effect in January, and so will fall out of the inflation calculations at the beginning of next year.
They insist, therefore, that, given time, inflation will fall away of its own accord, without the need to raise rates in the short term.
The latest ONS figures could strengthen their resolve to keep rates on hold for longer.
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