UK inflation remains in double digits as food prices stay high

UK inflation remained in double digits in March with annual value rises of 10.1 per cent, elevating the possibilities of additional rate of interest rises from the Financial institution of England.

Shopper value inflation had been 10.4 per cent in February and was anticipated to drop to 9.8 per cent final month.

Though petrol and diesel costs fell within the month, additional sharp rises within the prices of meals, recreation and tradition left the index in double digits.

The BoE had been watching these figures very intently as they have been the final vital knowledge launch earlier than its subsequent assembly in early Could.

Officers had hoped that there can be the primary indicators of a major drop in inflationary stress, however core inflation, excluding meals and vitality costs, remained unchanged at 6.2 per cent, which stays too excessive to offer them consolation.

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Grant Fitzner, chief economist of the ONS, mentioned that inflation remained at a “excessive stage”. Falling motor gas costs “have been partially offset by the price of meals, which continues to be climbing steeply, with bread and cereal value inflation at a report excessive,” he mentioned.

The drop in headline inflation was virtually totally brought on by motor fuels the place the common value of a litre of petrol fell from simply over £1.60 in March 2022 to simply beneath £1.47 final month.

Offsetting this and maintaining the headline price excessive have been hovering meals costs, particularly of bread and cereals, which hit a brand new report, with costs rising 19.1 per cent within the yr to March.

The BoE’s Financial Coverage Committee has been in search of indicators that underlying inflationary stress is moderating and that declines within the headline price should not triggered solely by giant vitality value will increase final yr starting to drop out of the annual comparisons.

The members is not going to be reassured by each providers inflation remaining at 6.6 per cent and core inflation failing to fall, as an alternative sticking at 6.2 per cent. The MPC has mentioned that it’ll elevate rates of interest once more from the present 4.25 per cent stage, “if there have been to be proof of extra persistent pressures”.

Kitty Ussher, chief economist on the Institute of Administrators, mentioned that the failure to see any drop in core inflation would require the financial institution to take motion and lift charges once more on Could 4. “Taken along with yesterday’s sturdy labour market knowledge, it’s now clear that there’s extra demand within the economic system than the Financial institution of England had anticipated within the first quarter,” she mentioned.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, mentioned the autumn within the headline price had been “too modest for the MPC to cease elevating charges”.

Capital Economics, the consultancy, mentioned that the stubbornness of excessive inflation raised the likelihood {that a} rise in rates of interest to 4.5 per cent on the Could assembly will not be the final.

UK inflation has not been falling as shortly as comparable indicators in lots of European international locations which noticed decrease vitality costs mirrored within the March knowledge, however headline charges for the UK are anticipated to drop considerably subsequent month.

With fuel and electrical energy costs for April already identified, the annual enhance on this part will fall from 96 per cent to 27 per cent, though customers is not going to really feel higher off because the vitality value cap will keep on the similar stage. These costs are anticipated to begin falling in the summertime.

Headline inflation continues to be on track to halve by the top of the yr, assembly the federal government’s goal. In a press release, Jeremy Hunt, chancellor, mentioned: “These figures reaffirm precisely why we should proceed with our efforts to drive down inflation so we are able to ease stress on households and companies”.

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