It’s good news for inflation – now will the Bank of England go big and slash rates?

Price rises eased again in March raising a question which has borrowers on tenterhooks: Could the Bank of England go big at its next meeting?

The official rate of inflation in March fell from 2.8 per cent to 2.6 per cent, with the Consumer Prices Index (CPI) undershooting economists forecasts (2.7 per cent) – just as it did in February.

A deeper dive into the numbers offers further comfort for the Bank’s rate-setting Monetary Policy Committee (MPC). The longtime bogeyman – service prices – also undershot expectations, falling to 4.7 per cent from 5 per cent. That is still too high. But the decline is very welcome. Core inflation – which excludes volatile energy, food prices and tobacco – eased to 3.4 per cent from 3.5 per cent.

Again, that figure will discomfort monetary policymakers, because it is too high. But the downward move is welcome. Big drivers included toys and games – computer games, in particular – and petrol prices. Food price rises mercifully eased to 3 per cent from 3.3 per cent and the start of a supermarket price war should further help.

Donald Trump’s tariffs and trade war inevitably loom over the future pathway for prices. These will take out some of the life that the UK economy, which got a boost from manufacturers rushing to beat the US levies, showed in February.

Make no mistake, they will hurt but should also ease overall inflationary pressures. Keir Starmer’s cautious response when it comes to retaliation also helps. Reciprocal tariffs on US goods will inevitably be passed on to British consumers.

The City has now all but fully priced in a quarter-point cut at the MPC's next get-together early next month. But some, notably former Bank deputy governor Charlie Bean, have argued that still more is needed to counter the negative impact of the tariffs, the global uncertainty they have ushered in and the upper-cut Trump delivered to economic confidence across the globe.

A big move would be widely welcomed, particularly by small businesses but also by those dipping their toes into the mortgage market. Fixed-rate deals have already moved lower in anticipation of lower rates. Remember: the City’s interest rate swaps market governs the price of these. But a bigger than expected downward move in base rates would have a positive impact on that market.

Trouble is, as I have written before, this is a conservative MPC, one not inclined to make statements with big moves in the way other central banks have, including the US Federal Reserve.

The case for more help for an economy that could surely use a pick-me-up is strong. The problem is that inflation is expected to head north faster than a souped up snowmobile. April was misery month when it comes to the price of a host of basic essentials. Your starter for 10 was OfGem’s price cap, pushing up domestic energy prices. You can add in broadband contracts, mobile phone bills, water bills.

If the Bank of England is right, there is more pain on the way. It expects price rises to peak at 3.7 per cent in the third quarter of this year. That is almost twice the MPC’s 2 per cent target, which, as it is fond of reminding us every time it publishes its minutes, is central to its policymaking. It applies at all times.

Yes, there are those tariffs. But Sarah Breeden and Clare Lombardelli, who are both deputy governors at the Bank, as well as Megan Greene, an external member of the MPC generally considered to be among its rate hawks, have warned that it is too early to properly assess their impact, which is a fair point. That trio represents a third of the votes on the nine-member committee.

So while the fall in inflation is good news, it wouldn’t pay to get too excited. There may be one or two members prepared to join Swati Dhingra, the MPC’s dove-in-chief, who I think is almost certain to vote for a half-point cut. Take note if the vote goes 6-3 or even 5-4: the market will take it as a clear signal.

But I don’t expect the majority on the MPC to abandon their cautious instincts. There isn’t enough here to move the mountain.

I think I might be inclined to vote with Dhingra, but it wouldn’t be an easy decision. The economy needs help and the coming spike in inflation should ease by the end of the year. Cutting too late can prove just as problematic as cutting too early as far as that 2 per cent target goes (a point often made by Dhingra). But Dhingra tends to find herself in the position of voice in the wilderness.

At least the price of fun provided a bright spot. Overall prices in the recreation and culture division rose by 2.4 per cent in the 12 months to March, down from 3.4 per cent in the 12 months to February.

Of course, they’re still rising and the increases are cumulative. But right now, I imagine most people will take what they can get. Sad to say, its not a pretty sight overall even if the MPC will provide a small dose of relief next month. With another cut potentially coming in June? I wouldn’t rule it out.