British consumer sentiment held steady in March but households turned positive about the outlook for their personal finances for the first time in more than two years, an industry survey showed on Friday.

The GfK consumer confidence index remained at -21 in March, unchanged from February, and slightly below forecasts in a Reuters poll of economists which pointed to a reading of -19.

GfK's measures of households' expectations for their personal finances rose to +2 from 0 in February.

"The improved personal finance measure ... is encouraging because it’s the first positive and the highest score since December 2021," GfK client strategy director Joe Staton said.

"This is welcome news given the challenges faced by Britons of fiscal drag, higher costs for fuel, rising council taxes and utilities eroding any increases in wages or other income."

British consumer price inflation slowed to 3.4% in February, and the Bank of England expects it to temporarily fall below its 2% target during the second quarter due to the impact of finance minister Jeremy Hunt's decision to freeze fuel duty again.

BoE Governor Andrew Bailey, who along with seven other members voted to hold interest rates at a 16-year high of 5.25% this week, said he was hopeful about the path for inflation, but needed to see further evidence before cutting interest rates.

A decline in GfK's sub-index of major purchases continued this month.

Staton said Friday's figures raised questions about Britain's economy ahead of the election that Prime Minister Rishi Sunak is expected to call later this year.

"Are we temporarily on pause, or are consumers about to press 'reverse'? In the run-up to the next UK general election, these are important questions for the future health of the economy," he said.

(Reporting by Suban Abdulla; Editing by William Schomberg)