LONDON, April 19 (Reuters) – Britain was the only nation in western Europe with double-digit inflation in March after it fell lower than anticipated, information confirmed on Wednesday, bolstering bets that the Bank of England will elevate rates of interest once more in May.
Consumer costs rose by an annual 10.1%, the Office for National Statistics stated, down from 10.4% in February however above the 9.8% forecast by economists polled by Reuters.
Inflation, which hit a 41-year excessive of 11.1% in October, continued to eat into the spending energy of staff whose pay is rising by much less, as the value of meals and non-alcoholic drinks jumped 19.1% in March – the largest such enhance since August 1977.
Milk, sugar and olive oil costs have been round 40% larger than a yr in the past.
Britain’s headline March determine was the highest in western Europe and the only one at 10% or above. Austria recorded a larger inflation fee in February.
The studying underlined expectations that Britain will undergo larger inflation for longer than its friends as a result of a diminished workforce following the COVID-19 pandemic, heavy reliance on pure gasoline for energy and heating, and commerce and labour market frictions brought on by Brexit.
Core inflation – which strips out risky vitality and meals costs – did not fall as anticipated and as an alternative held at 6.2%, as traders priced in a 95% likelihood that the BoE will elevate charges subsequent month, up from 80% on Tuesday.
Sterling rose in opposition to the greenback and British authorities bond costs fell to their lowest since early March.
“It’s now clear the UK has an inflation problem that is worse and more persistent than in Europe and the U.S.,” stated Ed Monk, affiliate director of private investing at asset supervisor Fidelity International.
[1/2] An individual carries a field of tomatoes throughout early morning enterprise hours at New Covent Garden Market in London, Britain, March 9, 2023. REUTERS/Henry Nicholls
“Price rises here are proving more difficult to neutralise and the Bank of England will almost certainly add at least one more quarter-point hike to borrowing costs.”
Services inflation – a gauge of largely home value pressures – additionally did not budge decrease in March.
“These figures reaffirm exactly why we must continue with our efforts to drive down inflation so we can ease pressure on families and businesses,” finance minister Jeremy Hunt stated.
FALLING SIGNIFICANTLY?
Last week the International Monetary Fund forecast that inflation would common 6.8% in Britain this yr – the highest of any main superior financial system, although not a lot above the speed of 6.2% forecast for Germany.
In March the BoE stated it anticipated inflation to “fall significantly” in the second quarter. In February, the BoE had forecast March inflation of 9.2%.
While inflation is more likely to drop naturally as final yr’s sharp will increase in vitality costs fall out of the annual comparability, the BoE is attempting to guage how briskly it’s going to decline.
Inflation in costs charged by producers fell sharply in March to its lowest since October 2021 at 8.7%, down from 11.9% in February, largely reflecting a drop in oil costs.
Raw materials prices for producers have been 7.6% larger than a yr earlier – down from February’s 12.8% however much less of a drop than economists polled by Reuters had been anticipating.
Reporting by Andy Bruce and David Milliken; enhancing by William James
Our Standards: The Thomson Reuters Trust Principles.
