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U.K. Inflation Rises Unexpectedly In March

U.K. Inflation Rises Unexpectedly In March

U.K. inflation increased for the first time in six months in March driven by higher food and clothing prices, denting hopes of another round of quantitative easing.

Annual inflation rose unexpectedly to 3.5 percent from 3.4 percent in February, the Office for National Statistics revealed Tuesday.

Economists had expected the annual rate to hold steady at 3.4 percent. Inflation continues to hover above the Bank of England's 2 percent target.

Meanwhile, consumer prices logged a slower monthly increase of 0.3 percent after a 0.6 percent gain in February. The increase matched economists' expectations.

Excluding energy, food and alcoholic beverages, core annual inflation rose to 2.5 percent in March from 2.4 percent in February. The rate was forecast to fall to 2.3 percent.

The largest upward pressures to the change in consumer price annual inflation between February and March came from food, clothing, and recreation and culture.

IHS Global Insight Chief U.K. Economist Howard Archer sees a real danger of inflation proving to be sticky over the coming few months as high oil prices impact. If consumer price inflation does prove to be sticky over the coming months, this will have worrying implications for U.K. growth prospects, he said.

Vicky Redwood, the chief U.K. economist at Capital Economics, said inflation will fall below its target later this year, as estimated by the central bank. Moreover, in the longer-term outlook, the economist expects that core price pressures will ease further as the economic recovery loses momentum again.

At the April policy meeting, the Bank of England maintained the size of quantitative easing at GBP 325 billion and the interest rate at record low 0.50 percent. The minutes of the meeting is due for release on April 18.

ONS data also showed that retail price inflation came in at 3.6 percent annually, in line with expectations, but down from 3.7 percent in February.

The retail price index, excluding mortgage interest payments or RPIX also climbed 3.7 percent, slower than the 3.8 percent gain in February.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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