Inflation falls to 2.6%

Inflation fell to 2.6% in March, down from 2.8% in February.

This is the second month in a row that the rate of price increases has eased and was a bigger fall than many analysts were expecting.

The drop was driven partly by a fall in petrol prices.

But a combination of factors means that inflation is expected to creep up again in the next few months.

Water bills, energy prices and council tax went up earlier this month and food prices are set to keep rising.

Meanwhile, the increase in national insurance contributions for employers has led to concerns that some businesses will pass on these costs to customers.

On top of that, US president Donald Trump has imposed new tariffs - taxes on imported goods - on all items entering the US, which many analysts believe will fuel inflation worldwide.

What is inflation and how is it measured?

Inflation is a measure of how fast prices are going up.

The Office for National Statistics measures inflation by tracking the prices of hundreds of everyday items in an imaginary shopping basket. 

So the headline inflation figure will show how much the price of this shopping basket has gone up.

We should stress though that if inflation falls, it doesn’t mean prices are falling too.

It just means they’re not going up as quickly.

What does inflation mean for your money?

If prices are going up, you need more money to buy the same goods and services.

When inflation gets too high, the Bank of England can raise interest rates to bring it back under control and closer to its 2% target.

This base rate influences the interest rates offered by banks and lenders.

A rate increase makes borrowing more expensive and people will have less money to spend elsewhere.

And that means demand falls, slowing price increases and helping inflation go down.

But if inflation is too low, the Bank of England may cut interest rates to make borrowing cheaper, encourage spending and drive economic growth.

Last month, the Bank of England kept interest rates on hold at 4.5%, partly because of the uncertain economic backdrop.