UK shop prices: The prices in British shops recorded the slowest pace of increase in more than two years in March, according to the British Retail Consortium (BRC), signalling a diminishing inflationary pressure in the country.

Shop price inflation decreased to 1.3 per cent from 2.5 per cent in February, marking the smallest annual rise since December 2021, as reported by the BRC.

Food prices saw a rise of 3.7 per cent, down from 5.0 per cent, while non-food prices increased by just 0.2 per cent, a notable slowdown from the 1.3 per cent growth observed in February.

The Bank of England anticipates that the headline inflation rate in Britain will drop below 2 per cent in the April-to-June period, largely influenced by further declines in energy costs.

Market sentiment suggests a roughly 50 per cent likelihood of the BoE cutting interest rates in June, the first such move since the COVID-19 pandemic began. A rate cut in August is already fully priced into interest rate futures markets.

BRC Chief Executive Helen Dickinson attributed the deceleration in inflation to intensified competition among retailers, declining dairy prices, and promotional offers on popular chocolate brands, despite some Easter treats witnessing price hikes.

However, Dickinson warned that retailers now face major cost pressures, including rising business taxes, expensive recycling proposals, and new post-Brexit border checks. 

Additionally, the recent nearly 10 per cent increase in Britain's minimum wage adds to the challenges.

The BRC's data was collected between March 1 and March 7, providing insights into the prevailing trends in shop prices.

(With Reuters Inputs)