- The consumer price index rose 10.1% a year, according to the Office for National Statistics, above a consensus projection of 9.8% in a Reuters poll of economists.
- That follows an unexpected jump to 10.4% in February, which broke three straight months of declines since October’s 41-year high of 11.1%.
City workers in Paternoster Square, home of the London Stock Exchange, in the City of London, UK, Thursday March 2, 2023.
Bloomberg | Bloomberg | Getty Images
Unexpectedly, UK inflation remained in double digits in March as households continued to grapple with soaring food and energy bills.
The consumer price index rose 10.1% a year, according to the Office for National Statistics, above a consensus projection of 9.8% in a Reuters poll of economists.
This was down slightly from February’s unexpected jump to 10.4%, which broke three consecutive months of declines since October’s 41-year high of 11.1%.
On a monthly basis, CPI inflation was 0.8%, above a Reuters consensus of 0.5% and down from 1.1% in February.
The consumer price index, including homeowners’ housing costs (CPIH), rose 8.9% in the 12 months to March 2023, down slightly from 9 .2% in February, but well above expectations.
The Core CPIH, which excludes volatile food, energy, alcohol and tobacco prices, rose 5.7% year-over-year, unchanged from February’s annual rise, which will concern the Bank of England.
“The largest upward contributions to the annual CPIH inflation rate in March 2023 came from housing and household services (primarily electricity, gas and other fuels), as well as food and household services. soft drinks,” the ONS said in Wednesday’s report.
As UK households continue to face high food and energy bills, workers in various sectors have launched mass strikes in recent months amid disputes over pay and conditions.
UK Finance Minister Jeremy Hunt said Wednesday’s figures reaffirm why the government must continue its efforts to bring inflation down.
“We are on track to achieve this – with the OBR (Office for Budget Responsibility) forecasting that we will halve inflation this year – and we will continue to support people with cost-of-living assistance. ‘an average value of £3,300 per household during this period last year, funded by windfall energy profit taxes,’ Hunt said in a statement.
The difficult task of the Bank of England
Last month, the Bank of England raised interest rates by 25 basis points to 4.25%, and traders are pricing in a 72% chance of another quarter-point hike in the May 11 Monetary Policy Committee meeting.
Economists expect the slight dip in the March headline figure to be followed by a larger drop in April, due to base effects from a jump in energy prices in April 2022, when the regulator British Energy has raised its price cap by 54%.
“While core inflation is expected to prove more tenacious, the pressure on consumer demand from higher taxes and the lagged impact of higher interest rates should put it on track to a firm downtrend by fall,” said Suren Thiru, ICAEW’s chief economics officer. (Institute of Chartered Accountants in England and Wales).
Britain’s economy was stable in February as widespread industrial action and the lingering cost of living crisis hampered activity, and Thiru suggested the MPC could be more divided on whether to raise the stakes further. interest rates in May, as “concerns grow over a stagnant economy.”
Hugh Gimber, global market strategist at JPMorgan Asset Management, said that while headline inflation is heading in the right direction again, the central bank is “still a long way from being able to feel comfortable that pressures on prices are under control.
“Yesterday’s labor market data provided a stark demonstration of how tight labor markets are fueling strong wage growth. The implications for today’s inflation were clear, given the strength of wage-sensitive service sectors,” Gimber said.
Unemployment in the UK rose slightly to 3.8% in the three months to the end of February, new data showed on Tuesday, as levels of economic inactivity fell and employment rates rose. also increased more than expected.
“For the BoE, although there are signs of easing tension in the labor market, particularly in the continued decline in job vacancies, the labor market remains tight overall,” said Victoria Clarke, British Chief Economist at Santander CIB.
“The latest report does not provide assurance that the MPC is likely to seek wage growth to slow to rates consistent with the BoE’s inflation target.”
While stabilizing energy prices will help contain inflation in the second half of the year, JPMorgan’s Gimber said it’s “increasingly clear” that a prolonged period of economic growth depressed will be needed to contain core price pressures.
“Another 25 basis point rate hike looks highly likely in May, and the Bank should stand ready to take further action unless economic data show more definitive signs of cooling,” he said. declared.
“Policymakers have come a long way in their fight against inflation. Going forward, the biggest mistake would be to declare victory prematurely.”