- UK CPI jumped from 3% to 3.3% in March – driven by the rising price at the pump and higher air fares and food prices
- The cost of raw materials rose by 5.4% in March up from 0.7% in February, largely because of the crude oil price
- Bank of England expected to hold rates when it meets next week
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK inflation figures:
“Anyone who has filled up a vehicle over the past few weeks will have first-hand knowledge of how the Iran war is impacting prices in the UK.
“Inflation, which had been coming down and might have reached within a whisker of the Bank of England’s 2% target in March, instead nudged back up to where it was at the end of last year.
“Households will be under no illusion that things are likely to get harder over the coming months as the cost of crude oil pushes up producer input prices, effectively baking in higher inflation for months to come. The last energy shock taught us all how rising oil and gas prices impact more than just the obvious heating and transportation costs.
“From the crops that are planted and fertilised, the plastic that wraps goods, the refrigerated trucks that carry them, and just keeping the lights on in stores where we shop, the entire supply chain is vulnerable.
“But households are inflation weary. They’ve been through the wringer already and they’re not in a position to stomach many more price increases – something that could limit how far inflation rises.
“This is set to be a very different experience from the last cost of living crisis and whilst inflation isn’t expected to peak anywhere near the multi-decade high experienced in October 2022, it is coming at a time when the economy is weak and the labour market is subdued.
“For the Bank of England, the spectre of stagflation will stalk MPC members as they sit around the table next week and try to keep their balance. If they don’t hike rates and inflation becomes embedded they will be accused of not acting soon enough, but if the UK does more than flirt with recession in the second half of the year they will face criticism for not doing enough to stimulate an economy struggling to remain steady.”
