UK inflation reached a 15-month high in March, according to the latest official Consumer Price Index (CPI) figures released by the Office for National Statistics (ONS).
The monthly CPI rose by 0.5% in the month to March, led by an increase of 22.9% in the price of air travel (1).
The increase surprised analysts, who expected inflation to fall in the range of 0-0.4% (2).
The ONS commented that the rate is “still relatively low in the historical context”, yet “after an unprecedented period of the consumer price index (CPI) being close to zero, inflation has begun to rise again” (3). The Bank of England predicts that inflation will remain below the government’s 2% target for some time (4). The Retail Price Index (RPI), which includes housing costs, measured inflation of 1.6% in March.
Ben Brettell, Economist at Hargreaves Lansdown, noted that “although inflation rose by more than expected, the overall trend remains weak, and places little pressure on the Monetary Policy Committee (…) All in all, the economic picture remains highly uncertain and I expect no action from Threadneedle Street for some time yet” (5).
Scott Bowman, UK Economist at Capital Economics, concluded that “the economy’s movement away from deflation resumed after stalling in February” (6).
As a result of limited inflationary pressure and a fragile economic backdrop, all nine members of the Bank of England’s Monetary Policy Committee (MPC) voted to keep interest rates at their 0.5% record low last month; the base rate has remained at 0.5% for seven years (5).