© Reuters. A woman pays for fruit and vegetables from a market stall in Buckingham, England
By David Milliken and William Schomberg
LONDON (Reuters) – Inflation in the UK increased in March as global oil prices rose and retailers reduced their COVID-adjusted discounts, and are expected to continue to rise as the economy reopens. after closing.
Consumer price inflation rose to 0.7% in March after falling to just 0.4% in February, slightly lower than the average forecast of 0.8% in a poll. the comments of economists from Reuters, according to official data released on Wednesday.
National Bureau of Statistics official Jonathan Athow said: “Inflation increased with rising gasoline prices and clothing recovered from the February slump.
UK inflation is forecast to increase in the coming months, due to an increase in household energy bills in April, global oil prices higher and relative to prices a year before COVID locked in demand. decline.
Fuel prices in March showed the biggest annual increase since January 2020. Clothing and footwear prices rose 1.6% in the month after stores closed due to door lock rules. prices in February, the biggest increase since 2017. Clothing and footwear prices are still 3.9% below a year ago, and food prices down 1.4%.
The Bank of England forecasts in February that inflation will reach 1.9% by the end of 2021 but many economists now expect it to exceed its previous target of 2%.
In the medium term, the BoE sees less upward pressure on inflation due to a weak job market, which is expected to continue even after the economy returns to its pre-pandemic scale. The forecast will happen early next year.
“Unlike the United States, where we expect inflation to be relatively sticky above 2 percent, we think the UK story is likely to be less interesting. Part of it is because we think the demand story. Compressed may be less obvious than in the United States, “said James Smith, an economist with ING.
Financial markets say there is a 50% chance the Bank of England will raise interest rates by a quarter point by the end of next year, but many economists think it may take longer for the BoE to move.
“We believe the Bank of England is likely to cease operations throughout 2021 but there is a clear growing possibility that the Bank can tighten monetary policy by 2022 – although for now, early 2023 looks more likely, “said Howard Archer, an economist at the EY Item Club.
Paul Dales at Capital Economics, said 2025 is his bet on the first rate hike.
BoE chief economist Andy Haldane in February likened inflation to a “tiger” that could be easily awakened. But his views are not widely shared by other members of the Monetary Policy Committee, he will resign in June.
Wednesday’s data showed some signs of inflationary pressure in the pipeline.
The ONS said prices driven by manufacturers as of March rose 1.9% for the year, their highest level in almost two years, and that the prices they paid for raw materials rose by nearly 5.9%, the highest since from September 2018.
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