CPI inflation falls to 2.8%

CPI inflation falls to 2.8%

26 Mar 2025

Simeon Willis, Chief Investment Officer, XPS Group, commented: “With inflation, it’s always worth reminding ourselves that we already knew 11/12^ths of what went into the 12 month calculation. The likelihood of this February’s price increases being greater than last February’s substantial price increases - which drop out of the 12 month calculation - was relatively low. Whilst there is still an expectation for inflation to increase before it falls, this wasn’t the month for it come through.

Whilst near term inflation is well above the BoE’s 2% target, longer term inflation expectations have been declining in the last 2 months, meaning that the real yield on UK government bonds above inflation is hovering at a record high for the last 20 years around 2%. This is good news for reducing pension schemes liability values. However, there is the potential for continued above target near-term inflation to constrain the scope for interest rate cuts, hampering economic growth, which will hurt pension schemes in other ways, via their risky assets.”