UK inflation beats forecast to stay in double digits

UK inflation shattered double-digit expectations in a sign that the cost of living crisis continues to grip families and businesses across the country, official figures released today show.

According to the Consumer Price Index released by the Office for National Statistics (ONS), the rate of price increases fell to 10.1% last month, after another sharp rise to 10.4% in FEBRUARY.

The number was above the city’s expectations of a drop to 9.8%.

March’s inflation rate was kept high by rapidly rising food prices, which jumped more than 19%, the fastest acceleration since the 1970s.

“Inflation fell slightly in March, but remains at a high level,” said Grant Fitzner, chief economist at the ONS.

“The main drivers of the decline were fuel prices and fuel oil costs, both of which fell after strong increases in the same period last year. Prices for clothing, furniture and household items rose, but more slowly than a year ago.

“However, these have been partially offset by the cost of food, which continues to rise sharply, with bread and cereal price inflation at an all-time high,” he added.

Worryingly, strong price pressures hidden in the numbers remain, with the core inflation rate – which excludes movements in food and energy prices and is seen as a more accurate gauge of price – still quite high.

It remained unchanged at 6.2% year on year in March and reached 0.9% on a monthly basis.

How will this impact the interest rate decision?

Bank of England officials have stressed that they need to see a reduction in underlying inflation before they feel comfortable halting rising interest rates.

Experts identified today’s inflation figures as crucial to the Bank’s decision whether to raise interest rates for the twelfth consecutive time at its next meeting on May 11.

The overshoot will likely tip the scales in favor of Governor Andrew Bailey and lifting borrowing costs costs another 25 basis points to post a financial crisis at 4.5%.

Inflation is wiping out Britain’s standard of living at a historic rate. ONS figures yesterday showed real wages fell 4.1 per cent and calculations by the National Institute for Economic and Social Research economic think tank put households on track for a massive fall purchasing power.

Chancellor Jeremy Hunt said: ‘These numbers reaffirm exactly why we need to continue our drive to bring inflation down to ease the strain on families and businesses.

More soon.