Jeremy Hunt hailed brighter signs on the economy today as inflation dropped to the lowest level in two and a half years.

The headline CPI rate fell to 3.2 per cent in March, down from 3.4 per cent the previous month and driven largely by easing food prices. 

It was last lower in September 2021 - although analysts had pencilled in a bigger dip to 3.1 per cent.

Rishi Sunak insisted the official figures showed the 'plan is working' and people will 'start to feel the difference'. 

The numbers were revealed after Andrew Bailey hinted that the Bank of England could start cutting interest rates before the US Federal Reserve.

However, markets have pushed back their expectations slightly after the inflation dip was slightly smaller than hoped. 

Speaking at the International Monetary Fund (IMF) in Washington, the governor pointed to 'strong evidence' that the process of reducing inflation was now 'working its way through'.

He said it was possible for the path of rates on either side of the Atlantic to diverge, adding: 'The dynamics for inflation are rather different now between Europe and the US.'

The comments came as the governor's Fed counterpart Jerome Powell warned that the US's battle to tame price rises was 'likely to take longer than expected'. 

ONS chief economist Grant Fitzner said: 'Inflation eased slightly in March to its lowest annual rate for two-and-a-half years.

'Once again, food prices were the main reason for the fall, with prices rising by less than we saw a year ago.

'Similarly to last month, we saw a partial offset from rising fuel prices.'

Mr Sunak said: 'Today's figures show that after a tough couple of years, our economic plan is working and inflation continues to fall.

'Having been 11 per cent when I became prime minister, it's now fallen to just over 3 per cent, the lowest level in two-and-a-half years.

'We have also seen energy bills falling, mortgage rates falling and, just this week, data showed people's wages have been rising faster than inflation for nine months in a row.

'My simple message would be: if we stick to the plan, we can ensure that everyone has a brighter future.'

Chancellor Jeremy Hunt said: 'The plan is working: inflation is falling faster than expected, down from over 11 per cent to 3.2 per cent, the lowest level in nearly two and a half years, helping people's money go further.

This welcome news comes on top of our cuts to national insurance, which save the average worker £900 a year, so people should start to feel the difference as well as see it in their pay cheques.'

Chancellor Jeremy Hunt insisted the official figures showed the 'plan is working' and people will 'start to feel the difference'

Simon Pittaway, Senior Economist at the Resolution Foundation, said: 'Many economies have struggled through an inflation-driven cost of living crisis over the past two years, but the UK has been an outlier – experiencing a prolonged period double digit price rises. 

'With UK inflation finally falling below the US, its unwanted outlier status is over.

'With a further significant drop due next month, inflation should soon return to target – and the pressure to cut interest rates will grow.'

However, Susannah Streeter of Hargreaves Lansdown cautioned that resilient labour market figures released yesterday could yet delay interest rate cuts. 

'Inflation in the UK has taken another welcome step towards target, but interest rate cuts remain elusively distant,' she said. 

'The drop was widely expected but was slightly less than forecast, with prices at the pumps offsetting a slowdown in food price hikes.

'Although consumer prices are heading in the right direction, it's not just the headline rate which determines Bank of England action. 

'Policymakers scan other data, and the snapshot of stubborn wage growth out this week continues to be a concern.'