Key events
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.”
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
Larry Elliott
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
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7am BST: UK CPI inflation report for March
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7am BST: UK PPI index of producer prices for March
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9.30am BST: ONS house price index for February
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10am BST: Eurozone inflation report for March
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Noom BST: US weekly mortgage application data
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3.30pm BST:
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