- The consumer price index rose 10.1% year-on-year, according to the Office for National Statistics, above the consensus estimate of 9.8% in a Reuters poll of economists.
- That followed an unexpected rise to 10.4% in February and snapped three consecutive months of decline since October’s 41-year high of 11.1%.
City staff at Paternoster Square, headquarters of the London Stock Exchange, in London, UK, on Thursday, March 2, 2023.
Bloomberg | Bloomberg | Good pictures
UK inflation was unexpectedly in double digits in March.
The consumer price index rose 10.1% year-on-year, according to the Office for National Statistics, above the consensus estimate of 9.8% in a Reuters poll of economists.
That was a slight decline from February’s unexpected high of 10.4%, which broke a three-month straight decline from October’s 41-year high of 11.1%.
On a monthly basis, CPI inflation was 0.8%, above the Reuters consensus of 0.5% and down from 1.1% in February.
The consumer price index, including owner-occupiers’ housing costs (CPIH), rose 8.9% in the 12 months to March 2023, down slightly from 9.2% in February, but more than expected.
Core CPIH, which excludes volatile food, energy, alcohol and tobacco prices, rose 5.7% over 12 months, unchanged from February’s annual rise – a concern for the Bank of England.
“The largest upward contributions to the annual CPIH inflation rate in March 2023 came from housing and household services (mainly electricity, gas and other fuels) and food and non-alcoholic beverages,” the ONS said in a report on Wednesday.
As British households continue to struggle with high food and energy bills, workers in many sectors have launched mass strikes in recent months amid disputes over pay and conditions.
Food and non-alcoholic drink prices rose by 19.2% in the year to March 2023, the sharpest annual increase for more than 45 years, the ONS said.
UK Finance Minister Jeremy Hunt said Wednesday’s figures reaffirmed why the government must continue efforts to reduce inflation.
“We’re on track to do this – with the OBR (Office for Budget Responsibility) forecasting we’ll halve inflation this year – and we’ll continue to support people with an average cost-of-living support of £3,300 per household per year and, lastly, funded by windfall taxes on energy profits,” Hunt said in a statement.
A difficult task for the Bank of England
The Bank of England raised interest rates by 25 basis points to 4.25% last month, and traders are pricing in a 72% probability of another quarter-point hike at the May 11 monetary policy committee meeting.
Economists expect a bigger fall in April, following a slight decline in March’s headline point, due to the underlying effects of higher energy prices in April 2022, as the UK’s Energy Regulator raised its price cap by 54%.
“While core inflation remains very stubborn, the fall in consumer demand from the lagged impact of rising taxes and interest rate hikes will lead to a firm downward path in the autumn,” said Suren Thiru, director of economics at ICAEW. (Institute of Chartered Accountants in England and Wales).
The UK economy was flat in February due to widespread industrial action and a persistent cost of living crisis, and Mr suggested the MPC could be further divided over whether to raise interest rates further in May. .”
Hugh Kimber, global market strategist at JP Morgan Asset Management, said that even if headline inflation is heading back in the right direction, the central bank is “still a long way from feeling comfortable that price pressures are under control.”
“Yesterday’s labor market data provided a stark demonstration of how tight labor markets spur strong wage growth. Today’s inflation axis is clear, given the strength of wage-sensitive service sectors,” Kimber said.
UK unemployment Margin up to 3.8% In the three months to the end of February, new data showed on Tuesday, while economic activity fell and employment rates rose more than expected.
“For the BoE, the jobs market remains tight overall, although there are signs of an easing of jobs market tightness, particularly in the continued fall in vacancies,” said Victoria Clarke, UK chief economist at Santander CIB.
“The latest report does not give any assurance that the MPC can expect to moderate wage growth towards rates consistent with the BoE inflation target.”
JPMorgan’s Kimber said that while stabilizing energy prices will help contain inflation in the second half of the year, it is “increasingly clear” that longer-term subdued economic growth will be needed to contain key price pressures.
“Another 25 basis point rate hike is likely in May, and unless economic data shows concrete signs of cooling, the Bank should be prepared to take further action,” he said.
“Policymakers have come a long way in their fight against inflation. Going forward, it would be a huge mistake to preemptively win.”
“Lifelong social media lover. Falls down a lot. Creator. Devoted food aficionado. Explorer. Typical troublemaker.”