United Kingdom Inflation March 2022

United Kingdom

United Kingdom: Inflation increases in March

April 13, 2022

Consumer prices increased 1.09% from the previous month in March, picking up from the 0.81% rise recorded in February. March's uptick marked the highest reading since April 1991. The reading was driven by rising prices for transportation, clothing and footwear, and housing and utilities.

Inflation increased to 7.0% in March, above February’s 6.2%, well above the Bank of England’s 2.0% target and higher than market expectations. March's result was the highest inflation rate since March 1992. Meanwhile, the trend pointed up, with annual average inflation coming in at 4.0% in March (February: 3.5%). Lastly, core inflation rose to 5.7% in March, from February’s 5.2%.

Inflation is expected to rise notably further in the coming months. The energy regulator Ofgem raised the energy price cap by over 50% from 1 April, while soaring fuel and food prices due to the war in Ukraine will also push up inflationary pressures. This should only be slightly tempered by monetary tightening and the cut in fuel duty announced in the Chancellor’s Spring Statement. Moreover, a further large increase in Ofgem’s price cap is on the cards for October if wholesale energy prices remain at current levels.

On the implications for monetary policy, Berenberg’s Kallum Pickering said:

“The 6.2% yoy rise in CPI during the first quarter far exceeds the BoE’s February projection of 5.7%. It virtually guarantees that the bank’s nine-member Monetary Policy Committee (MPC) will raise the bank rate by another 25bp to 1.0% at the next meeting on 5 May.”

FocusEconomics Consensus Forecast panelists expect inflation to average 6.3% in 2022, up 1.2 percentage points from last month’s forecast, and 3.0% in 2023.


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United Kingdom Inflation Chart

United Kingdom Inflation March 2022

Note: Annual and monthly variation of consumer price index in %.
Source: Office for National Statistics (ONS) and FocusEconomics calculations.

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