Inflation rises unexpectedly in March

| April 17, 2012 | 0 Comments
Inflation rises unexpectedly in March

Higher food and clothing prices helped to push inflation up slightly to 3.5 per cent in March, from 3.4 per cent in February.

The rise in inflation on the Consumer Prices Index (CPI) was unexpected and represents a break in a downward trend which started in September.

It is a setback to the Bank of England’s efforts to achieve the government’s inflation target of 2 per cent by the end of the year.

In contrast, Retail Prices Index (RPI) inflation, which includes housing costs such as mortgage interest and council tax, fell slightly in March, to 3.6 per cent from 3.7 per cent, according to the latest figures from the Office for National Statistics.

While the price of gas and electricity fell in March, basic food items such as bread, meat, cereals and vegetable were all higher than they were in March 2011, when supermarkets were launching a large number of discounted promotions.

Clothing DVDs and computer games were also more expensive in March 2012 than they were a year ago.

The rise in inflation is expected to be a temporary blip but it may make the Bank of England less likely to inject more stimulus into the economy next month through another round of quantitative easing.

Although both petrol and diesel increased to record high levels of £1.38 and £1.46 a litre respectively in March 2012, they did not contribute to the higher CPI inflation figures as a similar increase was experienced in March 2011.

After the inflation figures were published, the pound appreciated in value by 0.3 percent to 82.39 pence per euro.

Some analysts are suggesting that the pound is on track to climb towards 80 pence per euro, a level not reached since mid-2010.

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