The news sent the value of the pound down sharply as traders pulled back their bets on a May rate rise from the central bank
Inflation fell back unexpectedly to just 2.5 per cent in March – the lowest rate in a year – casting doubt on the Bank of England raising interest rates again next month.
City of London analysts had expected a reading of 2.7 per cent from the Office for National Statistics, equal to the reading in February.
The news sent the value of the pound down sharply to $1.4210, down 0.5 per cent on the day, as traders pulled back their bets on a May rate rise from the central bank.
The ONS said that the inflation rate had been pushed down by slower rises in the price of women’s clothing as well as easing pressures on the price of alcohol and tobacco.
Analysts had been expecting the Bank to raise the cost of borrowing again next month in order to dampen what members of the Monetary Policy Committee had identified as building inflationary pressures in the economy, following its first rate hike in a decade in November 2017.