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(Bloomberg) — UK inflation accelerated in March, as a surge in energy costs triggered by the Iran war started to hit consumers in the pocket.
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The consumer prices index rose 3.3% from a year earlier, up from 3% the previous month, the Office for National Statistics said Wednesday. The figure was in line with the expectation of economists.
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The pickup was driven by an 8.7% jump in the price of motor fuel, the largest monthly gain since 2022 when Russia invaded Ukraine. Services inflation, a key indicator of underlying price pressures, unexpectedly picked up to 4.5% from 4.3%.
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The report shows how the Middle East crisis has upended the outlook for inflation, with Brent crude close to $100 a barrel as the US and Iran fail to reach an agreement to end a 53-day war that has brought Persian Gulf oil and gas exports to a near standstill.
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The squeeze is also threatening to ripple out beyond the petrol pump into other everyday goods and services, with domestic gas and electricity prices set to rise in July and warnings that food inflation could reach close to double digits.
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Inflation had been on track to fall to the 2% target in the second quarter, clearing the way for further interest-rate cuts from the Bank of England. Now, however, it’s expected to stay at around 3% and accelerate in the third quarter, raising the possibility of rate increases instead.
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While policymakers are expected to keep borrowing costs on hold on April 30 as they seek more clarity on the conflict, they’ve signaled they are ready to act if needed to stop the energy price shock from spilling over into second-round effects.
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—With assistance from Mark Evans, Harumi Ichikura, Joel Rinneby and Rose Henderson.
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