UK inflation, highest in western Europe, falls only a little in March

Britain was the only country in western Europe with double-digit inflation in March after it fell less than expected, data showed on Wednesday, bolstering bets that the Bank of England will raise interest rates again in May.

Consumer prices rose by an annual 10.1%, the Office for National Statistics said, down from 10.4% in February but above the 9.8% forecast by economists polled by Reuters.

Inflation, which hit a 41-year high of 11.1% in October, continued to eat into the spending power of workers whose pay is rising by less, as the price of food and non-alcoholic drinks jumped 19.1% in March – the biggest such increase since August 1977.

Milk, sugar and olive oil prices were around 40% higher than a year ago.

Britain’s headline March figure was the highest in western Europe and the only one at 10% or above. Austria recorded a higher inflation rate in February.

The reading underlined expectations that Britain will suffer higher inflation for longer than its peers due to a diminished workforce following the COVID-19 pandemic, heavy reliance on natural gas for power and heating, and trade and labour market frictions caused by Brexit.

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