Rise in inflation does not change outlook for interest rates

bank of england

Inflation rose to 0.5% in March, up from 0.3% the month before, official figures show.

It is the highest rate of Consumer Price Index (CPI) inflation since December 2014, the Office for National Statistics (ONS) said. It was slightly above expectations of a 0.4% figure.

CPI statistician Phil Gooding said: “After an unprecedented period of CPI being close to zero, inflation has begun to rise again.”

The rise in inflation partly reflected a surge in air fares compared to the same period last year due to the timing of Easter, as well as increases in clothing and footwear prices.

But food prices continued to fall amid the ongoing supermarket price war while increases in petrol prices on the month were smaller than the year before.

Inflation fell below zero at times during 2015 and remains well below the Bank of England’s 2 per cent target.

Rises in air fares and clothing prices were the main contributors to the March increase, partially offset by a fall in food prices

Commenting on the figures, David Kern, BCC Chief Economist, said: “We have seen a slight upward trend in inflation since October 2015, and although the rise in March was bigger than expected, inflation is still well below the Bank of England’s 2 per cent target.

“However, with services inflation now approaching 3 per cent, and in view of the sharp fall in sterling in recent months, it will be understandable if the MPC becomes more cautious, and its job may become more complicated if the upward pressures on prices continue.

“Despite this, with the 2% inflation target not likely to be met until the end of 2017, and given the underlying problems facing the global and UK economy, the current inflationary pressures still do not justify any change in the MPC’s policy stance on interest rates.”

  Share:

Leave a Reply

*