The Consumer Prices index (CPI) paused its upward March, pausing at 2.3% in March.
This was in part attributed to both sterling and oil prices remaining flat over the month, but economists warn that the later date of Easter this year has distorted the figures, by reducing costs.
Compared to same period of 2016 air fare inflation dived 22.8%, reflecting an Easter weekend price spike which falls in April this year.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: ‘CPI inflation didn’t rise further in March only because the Easter holidays—when transport prices spike—were in late March last year but are in April this year.
‘Indeed, airline fares inflation plunged to -22.8% in March, from -1.3% in February, reducing its contribution to CPI inflation by 0.2%.
‘Sterling’s depreciation increasingly is boosting inflation across the rest of the inflation basket. Food inflation jumped to 1.2% in March from 0.2% in February, while core goods inflation also picked up to 1.2%, from 0.8%.
‘Meanwhile, the inflation rate for electricity, natural gas and other fuels rose to +0.9% from -0.4%, as one supplier increased electricity prices and the anniversary of past cuts in natural gas prices was reached.’
Tombs noted that several retailers have said they will pass on costs associated with sterling weakness to consumers, and he believes that the speed at which higher import costs will be passed on will create a dilemma for the Bank of England’s Monetary Policy Committee (MPC).
‘We continue to think that CPI inflation will climb to about 3.5% by the end of this year, thereby peaking earlier and higher than the MPC expects. Further upside inflation surprises might persuade more members on the MPC to vote to hike rates soon,’ Tombs said.
‘Nonetheless, with wage growth showing no sign yet of following inflation higher, we continue to expect a majority of MPC members to vote to keep Bank rate at just 0.25% this year.’
Original article by James Phillipps and was published on the CityWire website.