FTSE 100's rally peters out
And finally, the London stock market’s best run in almost two and a half years has ended.
The FTSE 100 has closed 10.6 points lower tonight at 7898.7 points, down 0.13%.
That follows eight daily gains in a row, which was the Footsie’s best run since December 2020.
The prospect of more interest rate increases, driving up borrowing costs, pushed down shares in retailers and commercial property firms.
High inflation will also leave households with less to spend, as Kevin Pratt, finance expert at Forbes Advisor, says:
“Inflation remains in double digit figures at 10.1% - it’s deeply depressing stuff, especially given the widespread expectation that it might fall below 10%. Any good news, such as falling costs at the petrol pump, is turned sour by soaring food prices, with inflation here nudging a shattering 20%. At 19.2% - up from 18.2% the month before - that’s the biggest annual increase in food prices for 45 years.
“Clearly, when people are battered at the supermarket checkout for their basics - the ONS highlights bread as seeing the highest increases since records began - they are going to draw in their horns when it comes to discretionary spending elsewhere in the economy. That’s more bad news for the UK’s beleaguered businesses as they struggle to generate sales and keep the economy moving.
And on that note, we’re wrapping up for the day. Goodnight.
Bloomberg’s Phil Aldrick points out another reason UK inflation is taking longer to come down:
This is why UK inflation is stubbornly high compared with EU rivals. The energy price cap, which resets every three months, means it takes longer for falling gas prices to feed into headline CPI https://t.co/tik8VwW69X pic.twitter.com/2ntCgCYGRZ
— Philip Aldrick (@PhilAldrick) April 19, 2023
All else equal, the household energy price reset in April will bring inflation down from 10.1% to 8.1%. German inflation is currently 7.8%. There will be other automatic reductions in June and July due to food and energy base effects. All else equal, CPI would be about 6% then
— Philip Aldrick (@PhilAldrick) April 19, 2023
Underlying inflation is a different matter. Sticky wages, sticky food prices as companies protect margins. Shops don't like cutting prices, so cheaper food will probably come through promotions. Story w/ @tomelleryrees @dasha_reports https://t.co/tik8VwW69X
— Philip Aldrick (@PhilAldrick) April 19, 2023
Another strike has just been announced.
Security officers at Heathrow Airport will take a further eight days of strike action next month in a dispute over pay, Unite says.
They will strike from 4th to 10th May, and again on 25th to 27th May.
#Breaking Security officers at Heathrow Airport will take a further eight days of strike action next month in a dispute over pay, Unite announced pic.twitter.com/FmDujvRJ4n
— PA Media (@PA) April 19, 2023
GSK has insisted that it has made a ‘fair and reasonable’ pay offer to workers, after the Unite union announced workers will strike throughout May in a pay dispute (see earlier post).
A GSK spokesperson said:
“We recognise that for many of our people, this past year has seen their cost of living rise rapidly and believe the offer we have made to our UK manufacturing colleagues covered by collective bargaining agreements is fair and reasonable.
“We are therefore disappointed that the Unite union has decided to take industrial action, despite receiving a final offer which includes a 6% increase on base pay, shift pay and allowances, plus a discretionary one-time payment of £1,300 – an overall package equivalent to a 9.7% increase.”
Unite argued today that this is a “substantial real terms pay cut”, compared to the “current true inflation rate (RPI)“ of 13.5%.
RPI is no longer an official ‘national statistic’, but is used as a benchmark for pay negotiations.
Afternoon summary
Time for a recap.
The City of London is anticipating that UK interest rates could hit 5% before the end of the year, after prices across the economy rose faster than expected, again.
UK inflation remained in double digits in March, with annual price rises of 10.1% last month, dashing hopes of a fall to 9.8%.
The data makes it almost certain that the Bank of England will increase interest rates next month, from 4.25% to 4.5%, with two more quarter-point increases also being priced in by the money markets before the year is over.
Golly
— Ed Conway (@EdConwaySky) April 19, 2023
Less than a month ago investors were betting @bankofengland interest rates would peak at 4.5% - or even 4.25%.
Now they’re betting they’ll hit 5% this year. Highest projected rate since mini-budget fallout.
Another consequence of unexpectedly high and stubborn inflation pic.twitter.com/0dHsMkXBvN
Many City analysts predicted the BoE’s MPC would vote to raise rates at its next meeting, on 11 May.
Inflation was driven up by soaring food prices, which have jumped by over 19% in the last 12 months, and higher energy bills.
But petrol and diesel prices are now lower than a year ago, as we catch up with the jumps after Russia’s invasion of Ukraine in February 2022.
Such high inflation means workers continue to suffer falling real wages, as nominal regular pay rose by 6.6% per year in the last quarter.
Chancellor Jeremy Hunt said the data showed why the goverment must continue with its efforts to drive down inflation, to ease pressure on families and businesses.
But unions urged ministers to resolve the public sector pay disputes, and recognised the need for higher wages
TUC General Secretary Paul Nowak said:
“With prices still rising much faster than wages, working families are desperate for better news on pay.
“But Rishi Sunak is dragging his heels on meaningful negotiations to resolve pay disputes. And yet he goes easy on the oil and gas giants treating families like cash machines.
Here’s the full story:
And analysis of the key price changes:
In the eurozone, meanwhile, inflation fell to 6.9% over the year to March, down from 8.5% in February.
In other news:
UK house prices fell in February, with the average property selling for £287,506, down from £290,381 in January. This pulled annual house price inflation down to 5.5% from 6.5%.
UK residential rents rose at the fastest annual rate since records began in 2016
The boss of Ryanair has criticised the “tissue of lies” fed to the UK public over Brexit.
Jaguar Land Rover has said it will invest £15bn over five years as Britain’s largest carmaking employer upgrades its factories to produce electric vehicles, including its first car with a UK-made battery.
The crisis at the scandal-hit Confederation of British Industry has burst into open conflict, as its recently sacked director general and current president argued over the grounds for his dismissal.
Hundreds of workers employed by GSK will stage a series of walkouts throughout May in a dispute over pay.
Heathrow Airport has launched an appeal against a decision that it must reduce charges for airlines.
A trio of telecoms firms have been accused of overcharging hundreds of thousands of landline-only customers by almost £200m.
Tesco may have to stop using a blue and yellow logo to promote its Clubcard loyalty scheme after the high court found it had copied a design by Lidl.
Takeaway delivery group Just Eat has announced plans to buy back up to €150m (£132m) of shares from investors, just weeks after cutting 1,700 couriers in the UK as part of a plan to scrap guaranteed minimum wage and paid holiday.
Google is to let Android developers bypass in-app payments on its Play app store for the first time, in an effort to head off an investigation from the British competition regulator.
The Body Shop is looking for a new permanent CEO, after confirming that boss David Boynton is stepping down this week
Updated
Professor Danny Blanchflower, a former Bank of England rate-setter, warns that further hikes to interest rates won’t help tackle inflation…
..at least, not until we see more bank failures!
the very flat Phillips curve and supply driven Brexit shocks suggests that the rate rise treatment won't do much of anything until financial institutions fail
— Professor Danny Blanchflower economist & fisherman (@D_Blanchflower) April 19, 2023
The Phillips curve is the idea that unemployment rates and wage growth are closely linked – when one rises the other falls. It’s underpinned central bank thinking for many years, but has looked murkier when it failed to pick up in the last decade.
Morgan Stanley analysts said they now expect a 25 basis point (bps) rate hike from the Bank of England in May, and see “clear risks of a June move too”.
Previously, the bank had anticipated no change in UK rates next month.
Morgan Stanley UK economist Bruna Skarica said.
“With sequential pressures in inflation this strong, it is hard to see how the tightening cycle can be stopped. Hence, we now expect a 25bp hike from the BoE in May.”
The pound is ending today’s session on the front foot, up 0.2% against the US dollar at $1.245 and 0.3% higher against the euro at €1.136.
That shows traders are anticipating higher UK interest rates.
Fawad Razaqzada, Market Analyst at City Index, says the UK’s “nightmare with inflation” continued in March, with consumer prices rising over 10% year-on-year.
It is a tough pill to swallow if you are a member of the Monetary Policy Committee at the Bank of England. A lot of fingers will be pointed towards Governor Bailey. Critics would argue he was too slow to respond to the emerging inflation threat last year and that mistake continues to threaten his and BoE’s credibility. By taking their sweet time in raising interest rates, the MPC will now have to over-correct with further rate rises than they were previously planning.
This is of course the last thing the economy needs right now, with household incomes being squeezed due to the cost-of-living crisis. Little wonder why everyone is going on strike.
Economists at French bank BNP Paribas predict UK interest rates will be raised next month, from 4.25% to 4.5%, but that this will be the peak of the current cycle.
They told clients today:
We now think the Bank of England monetary policy committee will deliver one more hike in May, to take Bank Rate to a peak of 4.50%.
Indeed, incoming economic data (inflation in particular), evidence on credit conditions and the monetary policy committee’s forward guidance all suggest that the MPC’s work is not yet done.
Our base case is for the MPC to keep Bank Rate at 4.50% over the remainder of 2023, with cuts only materialising next year, once inflation is closer to the 2% target.
BNP Paribas predict that seven of the nine members of the MPC would plump for another hike.
The money markets are still indicating Bank rate could be almost 5% by the end of this year.
Analysis: Inflation surprise makes Bank of England rate rise almost a certainty
The Bank of England’s MPC is likely to be unmoved by the plight of mortgage payers next month, when a majority of its nine members are expected to vote for an increase of 0.25 percentage point in the base rate to 4.5%.
My colleague Phillip Inman writes:
If they are to come close to eventually achieving their target of annual prices growth of 2%, the rate-setting committee believes its only recourse must be to increase borrowing costs and further dampen consumer spending. Only then does it expect shops to begin to restrict price increases.
There is another factor weighing on the MPC – the ugly comparison with inflation among the UK’s main competitors. In the eurozone it stands at 6.9% and only 5% in the US.
Kitty Ussher, the chief economist at the Institute of Directors said these trends meant “the Bank of England’s job is not yet done”, highlighting issues with core inflation – a measure that strips out volatile elements such as fuel and food prices, which has become the focus of the MPC’s concerns in recent months.
“While it is a relief that the headline rate of inflation is now pointing downwards again … the improvement this month is predominantly due to falling transport prices which, although welcome, hides an underlying stickiness in core inflation, which at 6.2% has not yet started to fall,” she said.
More here:
Economists at RBC Capital Markets have joined the ranks of those predicting UK interest rates will rise again in May.
They say:
Having previously expected the MPC to hold Bank Rate at 4.25% at its next meeting on May 11th, we think this week’s UK data releases brings the meeting into play and now look for the MPC to deliver a 25bps rate when it meets next month.
Back in UK retail, Tesco may have to stop using a blue and yellow logo to promote its Clubcard loyalty scheme after the high court found it had copied a design by Lidl.
The judge found Tesco had infringed Lidl’s trademark and was guilty of “passing off” in misleading shoppers into thinking that products under the Clubcard Prices scheme are offered at the same or lower prices as those in Lidl.
The dispute kicked off after Tesco began using a yellow circular design with a blue background to promote offers available for members of its Clubcard loyalty scheme. Lidl’s main logo follows that design, with the addition of a red circle and its brand name.
The judge found Tesco guilty of “copying with a view to enhancing the value perception of Tesco’s own Clubcard Prices offering by adopting a getup, in the form of a blue background and yellow circle, which already had a proven association with a strong value proposition (ie the Lidl Logo) in the minds of consumers”.
More here:
John Coldham, intellectual property partner at the law firm Gowling WLG, says Lidl clearly won the day:
Lidl has achieved a comprehensive victory over Tesco in its battle over the use of the competing yellow circle on blue background logos – used by Lidl as its main branding, and by Tesco in relation to its Clubcard Prices promotion. The High Court today found that Tesco had infringed some of Lidl’s trade marks, passed itself off, and infringed the copyright of Lidl. Justice Joanna Smith found that “Tesco has taken unfair advantage of the distinctive reputation which resides in the Lidl [logo] for low price (discounted) value.”
Tesco did also achieve a minor victory, with the court finding that Lidl had registered its logo without words within it, in bad faith. However, there is no doubt that Lidl has won the day, and the end result will be that Tesco will have to find a new logo for the Clubcard Prices promotion.
The New York has opened in the red, as expectations of further US interest rate rises dampen the mood on Wall Street.
The Dow Jones industrial average, which tracks 30 large US companies, has dropped by 134 points or 0.4% to 33,842 points.
The broader S&P 500 has lost 0.5%, with the tech-focused Nasdaq Composite down 0.6%.
Wall Street Struggles to Make Headway
— TRADING ECONOMICS (@tEconomics) April 19, 2023
The Dow lost 100 points in early deals on Wednesday, while the S&P 500 and Nasdaq 100 were down 0.4% and 0.5%, respectively, as investors digested a batch of earnings repor...
More here: https://t.co/t5tNk3mpX5 pic.twitter.com/BUW0RN95nF
The UK’s higher-than-expected inflation rate in March will also have disappointed those hoping for a more rapid disinflation, says Stephen Innes, managing partner at SPI Asset Management:
UK CPI shook the trees after surprising notably to the upside and is now almost an entire percentage point higher than the BoE forecast in February.
Why is inflation higher in the UK?
Two factors have driven inflation in the UK higher than other advanced economies.
It has experienced a big energy shock (like the euro-zone) following the invasion of Ukraine, and persistent labour shortages (even worse than the US).
The UK’s labour force is still smaller than it was before the pandemic, in contrast to many other major advanced economies. Some older workers have not returned to the workplace due to ill health or early retirement, and Brexit has led to a drop in EU workers.
As such, “the UK has experienced the worst of both worlds”, explains Ruth Gregory, deputy chief UK economist at Capital Economics.
She adds:
Admittedly, the upward influence of the energy supply shock will fade fast. But tighter labour market will probably mean UK core inflation stays above that in the US and the euro-zone until late-2024.
Oil hit by interest rate expectations
The oil price has dropped today, as traders anticipate growth-sapping interest rates rises on both side of the Atlantic.
Brent crude has dropped by 1.65% or $1.40 per barrel to $83.38 today, its lowest since the Opec cartel surprisingly cut production at the start of this month.
The prospect of another hike in US borrowing costs, which could slow growth and curb oil consumption, is outweighing strong Chinese economic growth.
Inflation in the US is less of a problem than in the UK at present – America’s CPI rate fell to 5% per year in March, meaning prices are rising twice as fast in Britain.
But still, the Federal Reserve is likely to have one more interest rate rise in store, Atlanta Fed President Raphael Bostic predicted on Tuesday.
Analyst: inflation is still scalding
Soaring UK inflation is devouring people’s spending power, explains Susannah Streeter, head of money and markets, Hargreaves Lansdown.
She points out that the small drop in inflation in March, from 10.4% to 10.1%, shows that price rises are ‘stubbornly high’.
‘’The heat has been turned down on the bubbling cauldron of prices, but inflation is still scalding and interest rates look set to be pushed up again to try and cool it down rapidly.
Instead of retreating below double digits, CPI is staying stubbornly high, causing more pain for companies and consumers. The relentless rise in food and non-alcoholic beverages is vicious, soaring to 19.2% in the year to March, up from 18.2% in February.
Food prices haven’t risen this quickly over a year since August 1977, when the Queen was celebrating the silver jubilee and a smaller one-pound note was introduced.
Carmaker JLR is announcing it will spend £15bn over the next five years in a push on electric vehicles, as it bids to become the world’s leading modern luxury car manufacturer.
JLR says it will start taking orders for a modern luxury all-electric Range Rover from later this year, which will launch in 2025 and be built at Halewood in Merseyside.
Halewood will become an all-electric production facility, as JLR moves towards offering pure-electric medium-size SUVs.
The move “further affirms JLR’s commitment to the future of the UK car industry”, it says.
The company also plans to make a new modern luxury electric Jaguar in Solihull. This 4-door GT (grand tourer) will have a range up to 700kms, JLR says, and cost from £100,000.
#JustIn | #JLR to push #EV transformation with GBP 15 billion #investment over 5 years
— CNBC-TV18 (@CNBCTV18Live) April 19, 2023
🚘JLR’s 5-year plan focuses on #EVs, #autonomous, #AI, & #digital technology@ShereenBhan
Here's more👇 pic.twitter.com/8BQw1LzkIC
UK inflation, the key charts
Oooft. Former BoE rate-setter @asentance says UK interest rates may need to rise “closer to 6%” to get inflation problem under control.
— Jamie McGeever (@ReutersJamie) April 19, 2023
Elsewhere today, Heathrow Airport has launched an appeal against a decision that it must reduce charges for airlines.
The UK’s largest airport is refusing to accept an order to cut passenger charges by about 20% next year.
Earlier this year, the Civil Aviation Authority (CAA) said the cap on Heathrow’s average charge per passenger must be reduced from £31.57 for 2023 and last year, to £25.43 over the next three years.
Heathrow had pushed for an increase to more than £40 a passenger.
Charges are paid by airlines but are generally passed on to passengers in air fares, so lower charges could help ease the cost of living squeeze in the next few years.
A spokesman accused the Civil Aviation Authority (CAA) of “undermining” the investment needed in the west London airport.
It’s official, David Boynton is stepping down as chief executive of The Body Shop, as we reported earlier (see 12.27pm post).
Natura, the group’s owner, has just confirmed that Boynton will leave, on Friday, having led the brand and business transformation of Body Shop since it was acquired from L’Oréal in 2017.
As my colleague Sarah Butler reported earlier, Ian Martin Bickley will be joining the Group as interim CEO.
Natura say:
“Ian will be working closely with The Body Shop’s executive leadership team to refine the current business plan and transformation agenda, as well as to accelerate the road to profitability and cash conversion recovery together with the return to sustainable revenue.
He will also be working closely with Natura &Co Leadership to find a permanent successor.”
Deutsche Bank sees UK interest rate rises in May, and June
Deutsche Bank has lifted its forecast for UK interest rates this year, after today’s higher-than-expected inflation reading.
Sanjay Raja, chief UK economist at Deutsche Bank, predicts the Bank of England will raise its 2023 growth forecast at its next meeting in May.
So with inflation looking sticky, and the labour market still tight, the BoE will probably raise interest rates by a quarter-point next month, to 4.5%, and likely again in June to 4.75%.
Raja told clients today:
We now expect the MPC to push through two more hikes, taking Bank Rate to the very top end of our terminal rate projection at 4.75% in June.
We expect the MPC to stick to its current data-dependent message in May. And importantly, we now see risks to our terminal rate forecast skewed to the upside.
Updated
GSK workers to strike throughout May in pay dispute
The UK’s long season of industrial action has reached pharmaceuticals firm GSK.
Unite, the union, has reported that hundreds of workers employed by GSK will stage a series of walkouts throughout May in a dispute over pay.
Workers voted for strike action having rejecting a pay offer worth 6% (well below inflation) plus a one off lump sum of £1,300.
Strikes will take place at six GSK sites – Barnard Castle, Irvine, Montrose, Ware, Worthing and Ulverston – during May.
Unite general secretary Sharon Graham said:
“This is an incredibly wealthy company that can fully afford to pay its workers a fair pay offer. This is a classic example of a company seeking to further boost its profits at the expense of its workers.
“Unite has a laser like focus on defending and enhancing the jobs, pay and conditions of its members and the workforce at GSK will be receiving Unite’s complete support.”
A GSK spokesperson said the company was “disappointed” that Unite had decided to strike “despite receiving a final offer”. The company has said it doesn’t expect any significant supply disruption from the strikes, Reuters adds.
Updated
Body Shop CEO thought to be leaving
The Body Shop’s boss David Boynton is to exit the company after nearly six years in the job, my colleague Sarah Butler reports.
It is understood he will be replaced by Ian Bickley, a former executive at luxury brand Coach who already sits on the board of Body Shop’s Brazillian parent company Natura and of shoe brand Crocs.
The change comes as sales continue to fall at the ethical beauty retailer which has suffered since pandemic lockdowns led to a boom in home selling and interest in cheap treats such as face creams and bubble bath.
Natura recently sold off its Aesop luxury beauty brand for $3.7bn to L’Oreal as part of efforts to pay down debt after acquiring part of the Avon business. It has also been rumoured to be considering a sale of the Body Shop which it bought in 2017 for €1bn.
The Body Shop haven’t immediately responded to a request for comment, but an announcement could come as soon as today….
Updated
TUC: Food inflation rising nearly three times faster than wages
Back on inflation… and UK food prices are rising nearly three times faster than wages, new analysis from the TUC shows.
Today’s inflation report shows that food prices rose by 19.6% in March, compared to a year ago, while median monthly pay rose by 6.3% that month.
The TUC also highlighted that the minimum wage rose this month (+9.7%) at just half the rate of current food prices.
TUC general secretary Paul Nowak warns that “Britain’s cost of living nightmare is far from over”, adding:
“Food and energy bills are hammering household budgets – especially for those on lower incomes.
“Unless we bring prices under control – and get pay rising in every corner of the country – families will keep lurching from crisis to crisis.
“That means fair pay for all public servants and getting the minimum wage to £15 per an hour as soon as possible.
More from Michael O’Leary on Brexit:
"In the next five to 10 years, quite a number of the Brexiteers will die," Ryanair CEO Michael O'Leary says
— Bloomberg (@business) April 19, 2023
He adds that younger British people are "much more pro-European," as he speaks at Bloomberg #NewEconomyGateway in Ireland https://t.co/EPXl7jzvlI pic.twitter.com/RUqaMbOd6b
Ryanair CEO blasts 'tissue of lies' around Brexit
The boss of budget airline Ryanair has hit out at the UK’s government’s handling of Brexit, calling it “unbelievably messy”.
Speaking at Bloomberg’s New Economy Gateway event in Dublin today, Michael O’Leary said that the “sunny uplands” that were promised to the UK population have been “shown to be another tissue of lies”.
O’Leary added that Brexit has been much messier than his airline had expected, having “mistakenly assumed” that Boris Johnson’s government would show some competence, put the economy first and do a sensible deal.
O’Leary adds:
It turned out that was competely delusional, just like Johnson and the rest of his Brexit cohort.
Here’s a clip of him speaking:
“The sunny uplands… were shown to be another tissue of lies”
— Bloomberg (@business) April 19, 2023
Ryanair CEO Michael O’Leary says Brexit has been “unbelievably messy”
Updates from Bloomberg #NewEconomyGateway in Ireland: https://t.co/EPXl7jzvlI pic.twitter.com/hdThBzDJyB
Bloomberg has more details:
Ryanair’s O’Leary said Brexit has been “unbelievably messy” for companies, and has led to the UK labor market being “broken.” The discount airline has been forced to hire European and non-European staff on visas that O’Leary said are “ludicrously” expensive at £3,000 ($3,726) pounds each.
“The problem we find dealing with the government is there’s an obsession in most departments to find excuses that show where Brexit benefits,” O’Leary said during a panel discussion.
“Duty free is back on flights to and from Europe, that’s about about the only benefit.”
O’Leary also said that Ryanair’s business is “booming and getting boomier” with no sign of European consumers tightening their belts when it comes to travel.
O’Leary told the conference he was surprised at the strength of spending in the European economy at the moment, adding:
“There is full employment, people are getting paid every month and they are spending - they are certainly spending on travel.”
More experts are predicting that UK interest rates will keep rising, after inflation soared over the Bank of England’s 2% target in March.
Jeremy Batstone-Carr, European strategist at Raymond James Investment Services, says it looks likely that we are “far from the end of the rate hiking cycle”.
As Batstone-Carr points out, the inflation picture is far from rosy:
With annualised headline inflation clocking in at 10.1%, we may not yet be seeing the light at the end of the inflationary tunnel which has spurred the UK’s worst cost-of-living crisis in decades.
While inflation remains higher than had been hoped, it is at least a welcome fall after last month’s unexpected increase. However, the devil is in the detail which suggests an even less rosy picture.
A large part of the decline is due to the March 2022 fuel price spike of 9.9% dropping out of the annualised calculation, meaning that it no longer counts towards the inflation figure. A similar phenomenon is expected for April’s inflation figures, as the Ofgem price cap increase of 54% in April 2022 will also drop out of the calculations.
While the headline fall is certainly a move in the right direction, it is driven by these previous highs falling out of the formula rather than a significant drop in prices over the last month.
Orla Garvey, senior fixed income portfolio manager at Federated Hermes Limited, points out that the markets now see UK interest rates (currently 4.25%) rising to 5% by the end of the year:
“UK inflation has come in higher than consensus and where the market was trading. This marks yet another print that’s too high for comfort for the Bank and leaves a 0.25% rate hike in May almost nailed on. Market expectations have now moved, pushing terminal rates to 5%.
“UK inflation is nevertheless forecast to come down quickly over the course of 2023. This would make another 0.75% of increases unlikely and unnecessary, though the key question remains as to whether disinflation will come through quickly enough.”
Updated
Full story: UK inflation falls by less than expected as food prices soar
UK inflation fell by less than expected in March, sticking in double figures as households came under pressure from food and drink prices soaring at the fastest annual rate since 1977.
The Office for National Statistics (ONS) said annual inflation as measured by the consumer prices index fell to 10.1% last month, resuming a downward trajectory after an unexpected rise to 10.4% in February. Inflation had peaked at 11.1% in October. City economists had forecast a drop to 9.8%.
The odds of the Bank of England raising interest rates again next month jumped on the news, with markets pricing in a 97% chance that policymakers will lift the base rate to 4.5% on 11 May and indicating the measure could hit 5% by the autumn.
The smaller than expected inflation dip comes amid a decline in global oil prices over recent months, and as the immediate impact from Russia’s invasion of Ukraine in February falls out of the estimates for the annual increase in consumer prices.
However, those falls were offset by the price of food and nonalcoholic drinks accelerating by 19.1% in the year to March, fuelled by record growth in the price of bread and cereals, as well as a sharp rise for biscuits and cakes.
Grant Fitzner, the chief economist at the ONS, said:
“The main drivers of the decline were motor fuel prices and heating oil costs, both of which fell after sharp rises at the same time last year. Clothing, furniture and household goods prices increased, but more slowly than a year ago.
“However, these were partially offset by the cost of food, which is still climbing steeply, with bread and cereal price inflation at a record high.”
More here:
The detailed breakdown of the inflation shopping basket... some eye-watering increases.
— Richard Partington (@RJPartington) April 19, 2023
UK inflation: which goods and services have risen most in price? https://t.co/WgIkk9QU2Q
There was one piece of encouraging economic data amid the gloom this morning – UK goods and services producers slowed their price increases last month.
Output prices (what is charged ‘at the factory gate’) rose by 8.7% in the year to March, down from 11.9% in the year to February 2023.
Input prices (what firms pay for their own goods and services) rose by 7.6% in the year to March, down from 12.8% in the year to February, suggesting inflationary pressures in the economy eased.
The ONS says:
Inputs of crude oil and petroleum products provided the largest downward contributions to the change in the annual rates of input and output inflation, respectively.
Economist Julian Jessop, economics fellow at the IEA, tweets:
The only good news on UK #inflation today (there is some) is the confirmation that the *producer* price measures peaked some months ago.
— Julian Jessop (@julianHjessop) April 19, 2023
This includes PPI inflation in the #food sector, which means the CPI rate here should start to plummet soon... 👇🤞https://t.co/KUFJtTYDSn pic.twitter.com/fQZR392OG2
Eurozone inflation lower than UK, at 6.9% in March
Over in the eurozone, inflation fell to 6.9% over the year to March, down from 8.5% in February, official data just released shows.
Inflation was pulled down by falling energy prices, as in the UK.
Unprocessed food prices rose by 14.7% year-on-year across the eurozone, data provider Eurostat shows, below the 19% food inflation recorded in the UK last month.
Euro area annual #inflation at 6.9% in March 2023, down from 8.5% in February https://t.co/z4HpgpUiie pic.twitter.com/wiUQUAvqsJ
— EU_Eurostat (@EU_Eurostat) April 19, 2023
Compared with February, annual inflation fell in twenty-five Member States and rose in two. The lowest annual rates were registered in Luxembourg (2.9%), Spain (3.1%) and the Netherlands (4.5%). The highest annual rates were recorded in Hungary (25.6%), Latvia (17.2%) and Czechia (16.5%).
But, eurozone core inflation remained sticky.
Inflation excluding unprocessed food and fuel accelerated to 7.5% from 7.4%; an even narrower inflation measure that also strips out alcohol and tobacco picked up to 5.7% from 5.6%.
Updated
UK residential rents rose at the fastest annual rate since records began in 2016 in the year to March, as the squeeze on tenants continued.
The Office for National Statistics reports that private rental prices paid by tenants in the UK rose by 4.9% in the 12 months to March 2023, up from 4.8% in the 12 months to February 2023.
Annual private rental prices increased by 4.6% in England, 4.4% in Wales and 5.1% in Scotland in the 12 months to March 2023.
Within England, the highest annual increase was recorded in the East Midlands, at 5.1%, while the South East saw the lowest (4.2%).
Rental prices also jumped in London – by 4.8% per year, the highest annual rate since December 2012.
Where will it stop..In the 12mths to March 23, rental prices for the UK (exc London) inc by 5.0%, up from an inc of 4.8% in the 12mths to Feb 23. Private rental prices in London inc from 4.6% to 4.8%. This is the strongest annual percentage change in London since Dec 2012 @ONS pic.twitter.com/rBHxn3kXLd
— Emma Fildes (@emmafildes) April 19, 2023
Updated
Gurpreet Gill, macro strategist for Global Fixed Income at Goldman Sachs Asset Management, also believes a May interest rate increase is likely, saying:
“While the inflation data for March shows core services evolved in line with the Bank of England’s expectations, the upside surprise in core goods and foods was significant - with food prices rising close to 20% year-over-year.
“In recent months, UK economic indicators have been highly volatile. Efforts to bring about wage normalisation and disinflation have so far been a case of one step forward and two steps back.
“Continued inflationary strength in March, combined with a reacceleration in wage growth in February, will likely see the Bank retain its risk-management mindset and deliver another rate hike in May.”
UK house prices fell in February
The Bank of England has already raised interest rates eleven times in a row, which appears to be cooling the housing market.
House price inflation slowed to 5.5% per year in February, new data released by the Office for National Statistics shows, down from 6.5% in January.
That’s sharply lower than the recent house price inflation peak of 14.4% in July 2022, as increasing mortgage costs since September’s mini-budget pushed down demand.
The average price of a house sold dipped to £287,506 in February, the ONS reports, down from £290,381 in January. That’s £16,000 higher than 12 months ago, but £5,000 below the recent peak in November 2022.
The ONS’s data confirms the message from lenders such as Nationwide, who have also shown house prices falling this year.
The ONS adds:
The average UK house price has fallen for the third consecutive month, on both a seasonally adjusted basis and a non-seasonally adjusted basis.
Average house prices increased over the 12 months to £308,000 (6.0%) in England, £215,000 in Wales (6.4%), £180,000 in Scotland (1.0%) and £175,000 in Northern Ireland (10.2%).
Scotland’s annual house price inflation has generally been slowing since the recent peak of 13.8% in the 12 months to April 2022, slowing to 1.0% in the 12 months to February 2023.
The West Midlands saw the highest annual percentage change of all English regions in the 12 months to February 2023 (8.6%), while London saw the lowest (2.9%).
Some regions had a tougher month than others in Feb 2023 @ONS #houseprices pic.twitter.com/oWdNGPyMPi
— Emma Fildes (@emmafildes) April 19, 2023
Updated
With inflation at double-digit levels, it will be harder for dovish members of the Bank’s monetary policy committee to argue against further rate rises, argues the BBC’s Andy Verity.
The higher than expected inflation figure, with the Consumer Prices Index up by 10.1 per cent compared to a consensus forecast of 9.8 per cent, will embolden hawks on the Bank of England's monetary policy committee to raise interest rates again next month.
— Andy Verity (@andyverity) April 19, 2023
It will make it harder for the 'doves' on the committee to counter their argument that further rate rises are needed to head off inflation in the next few years. The doves are increasingly convinced that interest rate rises have already gone too far.
— Andy Verity (@andyverity) April 19, 2023
Last month, the MPC was split 7-2 when it decided to raise interest rates from 4% to 4.25%, with two members – Swati Dhingra and Silvana Tenreyro – voting to leave Bank Rate at 4%
Household finances are already going through the worst squeeze on their incomes we've seen since the depth of the financial crisis in 2009.
— Andy Verity (@andyverity) April 19, 2023
Here’s a breakdown of how costs have soared in the UK, from sugar to bread, and electricity to pet products, driving up inflation:
With UK inflation not yet back on track, the general consensus at the moment is that the Bank of England will need to hike by 25 basis points, or a quarter of one percentage point, at its May meeting, predicts Giles Coghlan, chief market analyst, consulting for HYCM.
The strong wage growth seen on Tuesday makes another interest rate rise more likely, Coghlan says [wages rose by a faster-than expected 6.6%, which meant real wage still fell].
He adds:
“The issue for the Pound and for the BoE is whether the latest data merits continued tightening.
The surge in average earnings will no doubt be sounding alarm bells that the dreaded wage-price spiral could become entrenched in the UK, which has moved the dial in favour of another 25bps hike when the monetary policy committee convenes next month.
Some investors are fearing that the dreaded wage-price spiral could be about to bite and it will be hard for the BoE to not hike rates next month”
Core inflation (stripping out food and energy) remains ‘stubbornly high’, says Debapratim De, senior economist at Deloitte:
“Inflation has come in above expectations. Food prices have risen at the fastest pace in over 45 years and even after excluding the effect of food and energy prices, residual inflation remains stubbornly high.
De adds that the Bank of England will want to see signs of broader easing of price pressures before contemplating interest rate cuts, cautioning that:
Interest rates seem likely to remain at their peak for longer than markets are expecting.”
The financial markets are pricing three more UK interest rate hikes over the next four Bank of England meetings, points out ING developed markets economist James Smith.
The Bank’s monetary policy committe is next due to set rates on 11th May, then 22nd June, 3rd August and 21st September (by when the markets now suggest rates could have risen to 5%, from 4.25% at present).
Smith says this “seems extreme,” though he agrees that a May interest rate increase is more likely than not.
As Smith explains:
The headline story from Wednesday’s UK inflation numbers is that core CPI stayed at 6.2%, having been expected to slip back towards 6%. Headline inflation unexpectedly stayed in double-digits at 10.1%, though that will start to change in April when the effect of last year’s electricity/gas price hike filters out of the annual comparison. We expect headline CPI to reach the 8% area next month, 5% by summer and roughly 3% around year-end on current trends.
“On paper that core inflation number looks pretty grim for the Bank of England ahead of its May meeting. But we need to remember that the Bank has been making a clear distinction between services and goods inflation over recent months. The former is seen as much more important for policymaking because trends in service-sector inflation tend to be more persistent and therefore relevant over a monetary policy horizon.
And when we cut out some temporary volatility earlier this year, the net effect of the past few months is that services inflation has stabilised. It came in at 6.7% in March, which is only fractionally higher than in February and in line with both our own and the BoE’s expectations at the time of the last meeting.
Updated
The Bank of England is failing ‘badly’ at controlling inflation, argues former BoE policymaker Andrew Sentance.
Sentance is calling for further interest rate increases to bring inflation into single-digit levels:
The @bankofengland continues to fail badly at controlling UK inflation. While inflation is falling in US and the euro area, it remains above 10 percent in the UK and may go higher next month.
— Andrew Sentance (@asentance) April 19, 2023
It is not rocket science to understand why UK inflation is so high and persistent. @bankofengland was slow to respond to the emerging inflation threat by raising interest rates. They will now need to over-correct with further rate rises.
— Andrew Sentance (@asentance) April 19, 2023
Pound up, FTSE 100 down after inflation data
Shares have opened lower in the City of London, as investors anticipate further increases in UK interest rates to fight inflation.
The FTSE 100 index of blue-chip equities is down 27 points, or 0.35%, at 7882, as its eight-day rally threatens to fizzle out.
Sterling is rallying, though. The pound has gained a quarter of a cent to $1.245 against the US dollar, and almost half a eurocent to €1.1365, on expectations that the Bank will lift interest rates higher in May, and maybe again later this year too.
#GBP jumps after UK CPI print comes in hotter than expected at 10.1% yoy, compared to the expected 9.8%. Although it is a reduction from the Feb number of 10.4%, most will be disappointed that it remains in double digit territory. Food the largest contributor to the high number.
— Saxo UK (@SaxoUK) April 19, 2023
March’s higher-than expected inflation figures are weighing on the markets.
Victoria Scholar, head of investment at interactive investor, tells us:
Core inflation which strips out the more volatile components like energy, food, alcohol, and tobacco rose by 6.2% year-on-year, also ahead of expectations for 6%.
Although there have been growing expectations for a dovish pause from the Bank of England in May, today’s hotter-than-expected inflation data with price pressures stuck above 10%, could tip the balance towards another 25-basis point increase at its next decision meeting.”
Updated
Sky News’s Ed Conway shows here how the City now believes UK interest rates could hit 5% this year, up from 4.25% today:
Golly
— Ed Conway (@EdConwaySky) April 19, 2023
Less than a month ago investors were betting @bankofengland interest rates would peak at 4.5% - or even 4.25%.
Now they’re betting they’ll hit 5% this year. Highest projected rate since mini-budget fallout.
Another consequence of unexpectedly high and stubborn inflation pic.twitter.com/0dHsMkXBvN
Updated
Key event
Today’s CPI inflation reading of 10.1% for March 2023 is not good news for the Bank of England, says Professor Costas Milas, of the Management School at University of Liverpool.
He tells us:
The inflation reading could offer some hints on the next interest rate move. Notice that CPI inflation stood at 10.2% for 2023 Q1. This is higher than the Bank’s inflation forecast of 9.73%.
Inflation is therefore proving (much) more stubborn than what the Bank expects. So it make sense to expect that the Bank’s Monetary Policy Committee (MPC) will raise interest rates further to 4.5% on 11th May.
In fact, UK interest rates could potentially rise up to 4.75 per cent by the end of 2023. This is because high public expectations of inflation, currently at 3% two-years ahead compared with the Bank’s inflation expectations of less than 1% (!) are putting additional pressure on current inflation through demand for higher wages.
But, Professor Milas points out that interest rate predictions are “far from straightforward” especially in periods of elevated financial stress like we are currently experiencing.
He adds:
If, instead, financial stress worries take over, UK interest rates might end up below 4% by the end of 2023. Interesting times ahead!
The UK now has Western Europe’s worst inflation rate, points out Andy Bruce of Reuters:
UK now has Western Europe's highest rate of #inflation after today's disappointing data, which showed the annual growth rate for consumer prices cooled to 10.1% from 10.4%.
— Andy Bruce (@BruceReuters) April 19, 2023
Consensus in a Reuters had pointed to a reading of 9.8% pic.twitter.com/SOYsOv8ZV8
Dreadful data for food and non-alcoholic prices - biggest annual increase since August 1977. pic.twitter.com/mnlDIIwgwl
— Andy Bruce (@BruceReuters) April 19, 2023
Helia Ebrahimi of Channel 4 News shows how the UK has a bigger inflation problem than other major European economies:
Here's the picture on Inflation:
— Helia Ebrahimi (@heliaebrahimi) April 19, 2023
> UK: 10.1%
> Germany: 7.8%
> France: 6.6%
Another area where the UK is underperforming our nearest competitors pic.twitter.com/IUTntgbGGE
Updated
Bank of England expected to raise rates in May
The odds of the Bank of England raising interest rates again next month have jumped.
The money markets indicate there is a 97% chance that the BoE lifts Bank Rate by a quarter of one percentage point to 4.5% in May – up from an 82% chance yesterday.
The markest also imply there’s a good chance that rates will hit 5% by the autumn – as this shows:
Golly
— Ed Conway (@EdConwaySky) April 19, 2023
Less than a month ago investors were betting @bankofengland interest rates would peak at 4.5% - or even 4.25%.
Now they’re betting they’ll hit 5% this year. Highest projected rate since mini-budget fallout.
Another consequence of unexpectedly high and stubborn inflation pic.twitter.com/0dHsMkXBvN
The Bank will be concerned that UK inflation looks to be stickier than hoped.
That could prompt it to tighten monetary policy harder to squeeze inflationary pressures out.
🇬🇧UK March Inflation higher than expected! 🚨
— MacroMicro (@MacroMicroMe) April 19, 2023
Monthly Growth
CPI 0.8% (est. 0.5%, prev. 1.1%)
Core CPI 0.9% (est. 0.6%, prev. 1.2%)
Yearly Growth
CPI 10.1% (est. 9.8%, prev. 10.4%)
Core CPI 6.2% (est. 6.0%, prev. 6.2%)
Data: https://t.co/WKZa6ia7Vv pic.twitter.com/U9kTKs6BSl
Martin Beck, chief economic advisor to the EY ITEM Club, says:
“After a surprise increase in February, CPI inflation resumed its downward path in March, falling to 10.1% from 10.4%. The fall in the annual rate was more than accounted for by falling petrol prices. However, mitigating this was a further acceleration in food price inflation, which reached its highest level in over 45 years.
“March saw both core and services sector inflation remain unchanged at 6.2% and 6.6% respectively. Stickiness in these measures, the latter of which the MPC often cites as an indicator of domestically generated price pressures, will concern the committee in advance of its May meeting.
The fact that this follows the latest labour market data [yesterday], which showed healthy jobs growth and a surprise pickup in private sector wage rises, and a stronger-than-expected performance from the economy, will probably tip the balance towards another rate rise next month.
"It's not the news that the Bank of England or the prime minister would have wanted"
— Bloomberg TV (@BloombergTV) April 19, 2023
As new figures show UK inflation lingering in double digits, @lizzzburden explains what it means for the government — and interest rates https://t.co/3wDWmtNUqb pic.twitter.com/4OorRWIDId
Updated
Policymakers urged to tackle 'greedflation'
Dr George Dibb, head of the Centre for Economic Justice at the IPPR thinktank, is urging UK policymakers to get a grip on ‘greedflation’, after CPI inflation stuck in double-digits again in March.
Dibb says price hikes by companies to lift their profits are driving up the cost of living, rather than rising wages (which, at 6.6% in the last year, continue to lag inflation).
He explains:
“Household budgets are feeling the pressure from high inflation, which remains in the double digits according to new data. Even though petrol prices have fallen, the cost of essential items like food continues to rise.
“While families struggle to make ends meet, some companies continue to make higher profits from these price hikes, ignoring the impact on consumers.
It’s time for policymakers to look at ‘greedflation’ and prioritise reining in corporate profits, instead of blaming workers’ wages for driving up inflation.”
Last month, the Unite trade union reported that large corporations have fuelled inflation with price increases that go beyond rising costs of raw materials and wages
Bank of England policymaker Catherine Mann has also expressed concern that UK companies could be exploiting the cost of living crisis to push through inflation-busting price increases.
The European Central Bank is also concerned that consumers in the eurozone are suffering from price gouging.
It said last month it was paying just as close attention to trends in profits as to wages.
Here’s a breakdown of the price changes which kept UK inflation at 10.1% in March.
Food and non-alcoholic beverages: 19.1%
Alcoholic beverages and tobacco: 5.3%
Clothing and footwear: 7.2%
Housing, water, electricity, gas and other fuels: 26.1%
Furniture, household equipment and maintenance: 8.0%
Health: 7.1%
Transport: 0.8%
Communication: 3.7%
Recreation and culture: 4.6%
Education: 3.2%
Restaurants and hotels: 11.3%
Miscellaneous goods and services: 6.7%
Overall, goods prices rose by 12.8% in the year to March, while services inflation stuck at 6.6%.
BRC: poor harvests and weak pound pushed up food prices
The weak pound and poor harvests abroad drove up food prices in March, says Helen Dickinson, chief executive of the British Retail Consortium.
Dickinson explains:
Food prices, especially for fruit, vegetables and sugar, rose as poor harvests in Europe and North Africa reduced availability, and the weak pound made importing more expensive.
Meanwhile, discounting helped inflation to ease in other areas such as furniture, and clothing & footwear.
“With food price inflation likely to slow in the coming months as we enter the UK growing season, we expect wider inflation will continue to ease. Nonetheless, prices for consumers will remain high, especially as household bill support is lifted.
Updated
Food price inflation soars over 19%
Food prices accelerated at their fastest rate in over 45 years last month, adding to the inflation pain suffered by households.
Food and non-alcoholic beverages inflation jumped to 19.1% per year in March, today’s CPI inflation report shows. That’s up from 18% per year in February.
Food prices alone jumped by 19.6% per year; bread and cereal prices rose by 19.4%, while meat cost 17.4% more than in March 2022 and fish price jumped 16.7%.
Whole milk prices soared by 37.9%, while eggs rose 32%.
Olive oil cost 49.2% more than last year – with supplies disrupted by the Ukraine war.
Vegetable prices rose 19.3%, while fruit was 10.6% more expensive.
The ONS says that food and non-alcoholic beverage inflation is the highest seen for over 45 years, with “Indicative modelled estimates” suggesting that the rate would have last been higher in August 1977, when it was estimated to be 21.9%.
Paul Dales, chief UK economist at Capital Economics, says food price inflation “continued to defy gravity” by rising once again to a new multi-decade high.
Here’s chancellor Jeremy Hunt on the news that UK inflation was higher than expected last month:
“These figures reaffirm exactly why we must continue with our efforts to drive down inflation so we can ease pressure on families and businesses.
“We are on track to do this – with the OBR (Office for Budget Responsibility) forecasting we will halve inflation this year – and we’ll continue supporting people with cost-of-living support worth an average of £3,300 per household over this year and last, funded through windfall taxes on energy profits.”
Petrol and diesel prices fall
Motor fuel prices fell year-on-year last month, pulling inflation down.
The ONS reports that motor fuel prices fell by 5.9% in the year to March 2023, compared with a rise of 4.6% in February.
Petrol prices fell by 1.2p per litre between February and March 2023, to an average price of 146.8p per litre – down from 160.2p/litre in March 2022.
Diesel prices fell by 3p per litre during last month, to 166.5p per litre, lower than the 170.5 pence per litre in March 2022.
But…..there were smaller upward pushes between February and March 2023 from transport services and, to a lesser extent, second-hand cars, the ONS adds.
So overall, the annual inflation rate for transport slowed from 3.1% in February 2023 to 1.0% in March 2023, the ninth consecutive monthly fall in a row since it peaked at 15.2% in June 2022.
Updated
At 10.1% in March, UK inflation has dropped back to January’s levels.
It has now remained in double-digit levels every month since last August (when inflation was 9.9%).
The Bank of England’s goal is to keep inflation at 2% in the medium-term.
On a monthly basis, the CPI inflation rate rose by 0.8% in March alone, the ON says.
That’s lower than the rise of 1.1% in March 2022, when the full-scale invasion of Ukraine drove up prices, but still a pacey monthly increase.
UK inflation falls to 10.1% in March
Newsflash: UK inflation has dropped, but remains in double-digit levels, as the cost of living crisis eased slightly last month.
The annual consumer prices index dropped to 10.1% in March, down from 10.4% in February, the Office for National Statistics reports.
This suggests hard-pressed consumers are seeing some relief after months of soaring prices.
But it’s higher than hoped, as City economists had predicted a fall to 9.8%.
UK INFLATION (CPI)
— Justin Waite (@SharePickers) April 19, 2023
YEAR ON YEAR
ACTUAL: 10.1%
FORECAST: 9.8%
PREVIOUS: 10.4%
Ben Laidler, global markets strategist at investment platform eToro, says “fingers are crossed” that Wednesday’s March UK inflation report finally sees a long-awaited fall back into single digits.
Laidler adds:
“The latest 10.4% inflation rate is forecast to fall to 9.8%, with the focus on relief from high-flying food, restaurant, and utility price rises. This would still be by far the highest inflation amongst major economies given the UK’s unique mix of very low unemployment and high energy prices.
“The UK has endured double-digit inflation rates since last July, and any meaningful decline would be particularly welcomed by the Bank of England as they consider a 12th and final interest rate hike at their May 11th meeting.”
Updated
Economists at Investec are expecting a drop in UK inflation in a few minutes, saying:
“Following the significant upside surprise in the February numbers, we expect a clear easing back to have taken place in March.”
They said a drop would be largely driven by lower petrol prices as demand continues to recover globally, particularly given that the new data will compare with March 2022, where prices shot higher following Russia’s invasion of Ukraine.
Investec also added that “supply chain disruptions and lower shipping costs” could also result in falling goods prices for the month.
Full story: UK inflation expected to dip below 10% as energy prices fall
Andrew Sentance, a former member of the Bank of England’s monetary policy committee, said yesterday that the Bank was itself partly responsible for double-digit inflation, our economics editor Larry Elliott writes.
Sentance said the Bank had continued with its money creation programme – quantitative easing – for too long.
He told MPs on the Treasury committee:
“We had this long period of extremely low interest rates and further injections of QE after the immediate problems and the financial crisis have passed.
That all, I think, has contributed over a period of time to the inflationary pressures that we’re now seeing.”
More here:
Introduction: Did UK inflation fall last month?
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Today we learn if the UK’s cost of living crisis has eased. New inflation data, due at 7am, is expected to show that prices rose at a slower rate in March.
The City of London is expecting inflation to fall to 9.8% per year last month, down from 10.4% in February.
A sharp fall in energy costs compared to March 2022, when the Ukraine war drove up prices, is thought likely to have dragged down inflation into single digits.
This would be the first time since last August that the consumer prices index has dropped below 10%. A fall would bring some relief to households, as they suffer a long real income squeeze.
It would also cheer both the Bank of England (which is meant to keep inflation at 2%), and the government (with Rishi Sunak pledging to halve the rate of inflation by the end of this year).
But….a month ago, economics were caught out when inflation actually rose in February.
Danni Hewson, head of financial analysis at AJ Bell, reminds us:
“The expectation is that the UK’s inflation reading will finally drop to single digits, but investors were caught on the hop last month after salad shortages and Valentine’s Day celebrations sent prices heading in the wrong direction.
“A second misstep is hugely unlikely as March was the month last year when prices at the pump shot up to record highs, an unpleasant portent of what was to come. By comparison this March was marked by falling retail sales and the comparison with those hikes last year should mean inflation finally falls below ten percent for the first time since last summer.
And even if inflation has fallen in March, prices will still be rising faster than pay.
Yesterday, we learned that regular pay rose by 6.6% per year in the three months to January.
Even if the economists’ prediction proves accurate, UK inflation will remain markedly higher than in the US and the eurozone, where it currently stands at 5% and 6.9% respectively.
The agenda
7am BST: UK CPI inflation report for March
7am BST: UK PPI index of producer prices for March
9.30am BST: ONS house price index for February
10am BST: Eurozone inflation report for March
Noon BST: US weekly mortgage application data
3.30pm BST: EIA weekly oil inventory data
Updated
