UK’s inflation rise takes Easter break
Unchanged rate of 2.3% compared to February is still the highest since 2013
UK inflation’s upward trajectory paused in March as the timing of Easter led to a drop in airfares, offsetting increases in the price of food and clothing.
While the rate was unchanged compared with February at 2.3 per cent, that’s still the highest since 2013 and up from just 0.5 per cent a year ago. The increase over the past year reflects higher fuel costs and the pound’s decline since the Brexit vote in June.
Inflation is already above the Bank of England’s 2 per cent target and is forecast to accelerate further, squeezing Britons’ finances as wage growth remains week. That’s splitting officials on the BOE’s Monetary Policy Committee. Kristin Forbes voted for an interestrate rise last month and some of her colleagues said they’re close to following her.
March data
While March’s data may be a temporary respite, it still showed price gains were faster than officials expected, said Samuel Tombs, an economist at Pantheon Macroeconomics.
“The MPC will continue to be surprised by how quickly higher import prices feed through to consumers,” Tombs said. “Further upside inflation surprises might persuade more members on the MPC to vote to hike rates soon. Nonetheless, with wage growth showing no sign yet of following inflation higher, we continue to expect a majority of MPC members to vote to keep bank rate” on hold this year, he said.
The pound was little changed against the dollar and was at $1.2414 as of 10:16am London time.
On the month, consumer prices rose 0.4 per cent, the Office for National Statistics said. Airfares fell 4 per cent, compared with a 23 per cent jump a year earlier, when the Easter holiday fell in March.
The financial squeeze on Britons appears to be hitting spending power, with the British Retail Consortium reporting yesterday that retail sales fell the most in six years in the first quarter.
With wage growth forecast to have slowed to 2.1 per cent in the past three months, the situation for households may worsen. The BOE sees inflation hitting close to 3 per cent by the end of the year.