UK inflation rises to 0.7% in March as clothing and fuel prices grow

[LONDON] British consumer price inflation rose to 0.7 per cent in March from 0.4 per cent in February, reflecting higher fuel and clothing prices, official figures showed on Wednesday, slightly below the average forecast of 0.8 per cent in a Reuters poll of economists.

"The rate of inflation increased with petrol prices rising and clothes recovering from the falls seen in February," Office for National Statistics (ONS) official Jonathan Athow said.

Food prices were lower than a year earlier.

British inflation is forecast to rise sharply in the coming months, due to an increase in regulated household energy bills in April, higher global oil prices and comparisons with prices a year ago when Covid lockdowns caused demand to slump.

The Bank of England (BOE) forecast in February that inflation would reach 1.9 per cent by the end of 2021 but many economists now expect it will exceed its 2 per cent target before then.

In the medium term, the BOE sees less upward pressure on inflation due to weakness in the job market which it expects to persist even after the economy returns to its pre-pandemic size which it has forecast will happen early next year.

BOE Chief Economist Andy Haldane in February likened inflation to a "tiger" that could be roused easily. But his view is not widely shared by other members of the Monetary Policy Committee, from which he will step down in June.

Wednesday's data did show some signs of inflation pressure in the pipeline.

The ONS said prices charged by manufacturers rose by 1.9 per cent in the year to March, the highest in nearly two years, and the prices they paid for their inputs jumped by almost 5.9 per cent, the most since September 2018.

REUTERS