UK inflation slowed in March, but less than economists had expected, leaving inflation stubbornly in the double digits.
Consumer prices rose 10.1 percent in March from a year earlier, the Office for National Statistics said Wednesday, slightly slower than February’s 10.4 percent. But economists had expected inflation in the country to fall below 10 percent for the first time since the summer.
Annual inflation in Britain peaked at 11.1 percent in October, but the downward trend was disrupted in February when inflation unexpectedly ticked higher. The Bank of England then raised interest rates to 4.25 percent for the eleventh time in a row in March.
The return to the downward path of inflation may provide some relief to households and policymakers, but cost-of-living challenges in Britain are still significant. Food prices rose about 19 percent in March from a year earlier, with bread, meat and cooking oil continuing to rise rapidly. The price inflation of bread and grains is at a record high, according to the statistics office. Core inflation, a measure that excludes food and energy prices, which tend to be more volatile, was 6.2 percent, the same as the previous month.
And headline inflation is still high compared to international peers. In the United States, the consumer price index fell in March, rising by 5 percent year-on-year, while inflation in the eurozone eased to 6.9 percent.
While inflation is expected to slow sharply later this year due to lower energy prices, it remains uncertain how quickly the pace of price increases will return to the central bank’s target of 2 percent. Policymakers at the Bank of England have been closely monitoring wage growth and private sector services prices to see how deeply inflationary pressures are becoming entrenched in the economy.
On Tuesday, data from the Bureau of Statistics showed that wages excluding bonuses rose 6.6 percent in the three months through February from the same period a year earlier, better than economists had expected. But there were also signs that the UK labor market was starting to loosen, supporting bets that the Bank of England is about to halt rate hikes. In February, the pace of private sector wage growth slowed slightly for a second straight month as job vacancies fell and more people returned to the labor market, Tuesday’s data showed.
Services inflation, which is strongly influenced by companies’ wage costs, remained stable at 6.6 percent.
Bank of England policymakers will meet again in early May to decide whether to raise interest rates again.
