Official figures show that UK inflation unexpectedly dropped last month, weakening the prospect of an imminent interest rate hike by the Bank of England.
The Consumer Prices Index (CPI) rate of inflation was 4% in March, down from 4.4% in February, but still double the British government's 2% target, the Office for National Statistics (ONS) said. Analysts had expected the rate to remain at 4.4%.
The drop in the cost of living was driven by falling food prices, the ONS said. Food prices slipped 1.4% in March - the biggest monthly drop since mid-2007 - as supermarkets rolled out heavy discounts to draw in cautious consumers.
The improved figures will be welcomed by the Bank of England's Monetary Policy Committee (MPC) which has been under pressure to raise interest rates from their historic lows of 0.5% as it battles with stubbornly-high inflation.
Last week, the MPC held interest rates for the 25th month in a row as it faced a mix of soaring inflation and sluggish economic growth.
The UK economy went into a shock 0.5% decline in the final quarter of 2010 and recent surveys of the services and manufacturing sectors have offered a mixed picture of the recovery.
The majority of MPC members believe the inflation surge is down to temporary price shocks and are minded to wait and see how well the economy fared in the first three months of 2011 before tightening monetary policy.
Today's figures will further alleviate pressure to raise interest rates imminently - even though the bank itself has forecast inflation hitting 5% in the coming months.
Separate ONS data showed that Britain's trade deficit for goods and services fell to its smallest level since February 2010. That suggests net trade will provide a bigger contribution to first-quarter GDP figures due later in April.
The ONS said that Britain's total global trade deficit fell to £2.44 billion in February from £3.86 billion in January, driven by an unexpected fall in the deficit for goods. Manufacturers have reported stronger exports for several months, but this has been slow to show up in official data.
