Chancellor George Osborne updated ministers on the inflation figures at this morning's meeting of Cabinet at 10 Downing Street.
A Number 10 spokeswoman said: "The Chancellor set out the fact that inflation has fallen by one-third since September and most market commentators expect inflation to continue falling later this year, which will provide some relief for families' budgets."
Graeme Leach, Chief Economist at the Institute of Directors, said: “The fall in inflation has screeched to a halt with the rise in headline consumer price inflation to 3.5 per cent and core inflation to 2.5 per cent.
"This probably puts the brake on any further expansion in quantitative easing in May, but the inflation outlook should still improve in the second half of the year."
Vicky Redwood, chief UK economist at Capital Economics, said the halt in the downward trend "should be only temporary".
She said: "Inflation should start to fall again before long, not least as last year's rises in energy prices continue to fall out of the annual comparison.
"We also expect core price pressures to ease as the economic recovery loses momentum again."
The biggest upward pressure came from the softer drop in food bills, a smaller fall in recreation and culture costs and higher clothing and footwear prices.
Fruit, bread and cereals and meat saw prices rise in March, compared with falls a year ago, which acted as a drag on the overall food category.
A spokesman for the Treasury said: "Inflation has fallen by a third since September. Most market commentators expect inflation to continue falling later this year, providing ongoing relief for family budgets."
The underlying rate of Retail Prices Index (RPI) inflation fell to 3.7% in March, from 3.8% in February, the ONS said.
The headline rate of Retail Prices Index (RPI) inflation fell to 3.6% in March, from 3.7% in February, the Office for National Statistics (ONS) said.
The Consumer Prices Index (CPI) measure of inflation rose to 3.5% in March, from 3.4% in February, official figures showed.
Economist, Howard Archer says: "While inflation should trend lower over the coming months, the very real danger is that it will prove significantly stickier than had been hoped for due to persistently high oil prices.
Sticky consumer price inflation would maintain an appreciable squeeze on consumers' purchasing power and dilute hopes that consumers will increasingly step up their spending as 2012 progresses."