United Kingdom: Inflation remains above the BoE's target in March

Consumer prices in the UK rose 0.4% in March compared to the prior month, down from February’s 0.7%. March’s uptick was driven by higher prices for alcoholic beverages and tobacco, clothing and footwear and furniture, household equipment and maintenance.

Inflation remained at 2.3% in March, the highest rate since September 2013 and bang in line with analysts’ expectations. Inflation had been rising steadily since the back end of 2015, but has shot up in recent months largely due to the depreciation of sterling, and now stands above the Bank of England’s 2.0% target rate. Coupled with recent figures showing sluggish nominal wage growth, high inflation is set to eat into consumers’ purchasing power. Annual average inflation picked up from 1.0% in February to 1.1% in March.

The Bank of England sees inflation averaging 2.7% in 2017 and 2.6% in 2018. FocusEconomics Consensus Forecast panelists expect inflation to average 2.5% in 2017, which is unchanged from last month’s forecast. For 2018, the panel forecasts that inflation will also average 2.5%.