News

Inflation unexpectedly rises to 3.5%

Inflation in the UK rose in March to 3.5 per cent, up from 3.4 per cent the previous month, driven by higher food, clothing and recreation prices, according to the Office of National Statistics (ONS).

The figures from the Consumer Price Index (CPI) put an end to the five-month run in falling inflation since it peaked at 5.2 per cent in September 2011.

The Retail Price Index (RPI), a broader measure of inflation often used for setting pay, stands at 3.6 per cent – down from 3.7 per cent in February.

According to the ONS, one of the biggest upward pressures came from food prices, particularly fruit bread and cereals, which fell much less on the same two months a year ago. Although prices generally rise between these two months, prices this year are 4.6 per cent higher than in March 2011 when supermarkets led heavy discounts and sales. Increases in clothing, footwear, computer games and DVDs prices also caused inflation to rise.

Small respite came from lower energy prices, particularly electricity, with smaller downward pressures coming from furniture, household equipment and maintenance.

The rise in inflation may cause concern for the Bank of England’s Monetary Policy Committee (MPC) whose targets hope to see inflation fall to two per by the end the year.

Talking to the BBC, Vicky Redwood, chief UK economist at Capital Economics, expected the trend to be temporary, saying: “Inflation should start to fall again before long, not least as last year’s rises in energy prices continue to fall out of the annual comparison.

“We also expect core price pressures to ease as the economic recovery loses momentum again.”

Economists have speculated that the rise in figures will quell the MPC’s decision to begin another round of quantitative easing when the current £325 billion programme is completed in May.