London—UK inflation slowed last month but held above 10 percent on soaring food prices, official data showed Wednesday, further fueling a cost-of-living crisis despite a series of aggressive interest-rate hikes.
The Consumer Prices Index rose by a stronger-than-expected 10.1 percent in March from 10.4 percent in February, the Office for National Statistics (ONS) said in a statement. Inflation held in double figures on surging food and housing costs, dashing expectations for a drop below 10 percent after the Bank of England sharply raised borrowing costs.
The rate had zoomed to a 41-year peak at 11.1 percent last October on sky-high energy bills after key gas producer Russia invaded Ukraine.
The UK’s Conservative government, headed by Prime Minister Rishi Sunak, had last month unveiled a budget aimed at tackling the cost-of-living crisis, which has sparked strikes as wages drop in value.
“These figures reaffirm exactly why we must continue with our efforts to drive down inflation so we can ease pressure on families and businesses,” said finance minister Jeremy Hunt.
“We are on track to do this… and we’ll continue supporting people with cost-of-living support.” Despite the efforts, official data this week showed that pay continues to grow more slowly than prices.
Food prices rocket
“Inflation eased slightly in March, but remains at a high level,” said ONS chief economist Grant Fitzner. The main downward impact was from falling motor fuel and heating oil costs, while clothing, furniture and household goods rose by less than one year ago.
Fitzner cautioned that this was “partially offset by the cost of food, which is still climbing steeply.”
Food price inflation rocketed in March to 19.1 percent, hitting the highest level since August 1977. The food rate has hit a series of 45-year peaks for several months.
There were record March gains for bread and cereal, chocolate and confectionery, other food products including ready-meals and sauces, and hot beverages, the ONS said.
“The cost of simply living has crept insidiously higher and wage increases are struggling to keep pace with such high inflation,” noted AJ Bell analyst Danni Hewson.
“UK consumers will be utterly fed up with the situation and they’ll be angry that other parts of the world seem to be benefiting from inflation falling much faster.”
Rate cuts
Hunt in March extended a subsidy on energy bills for a further three months, after the Ukraine conflict sent them surging — and fueled runaway global inflation. The government forecasts inflation will sink to 2.9 percent by the end of this year.
The Bank of England has ramped up interest rates 11 times in a row since late 2021 in a bid to tame consumer prices. The BoE’s key rate currently stands at 4.25 percent, the highest level since late 2008.
Yet inflation remains at more than five times its official target of two percent. The central bank’s next decision is due in May. “The (inflation) drop is too modest for the (BoE) to stop raising rates; we now look for a final 25 basis-point hike,” commented Pantheon Macroeconomics analyst Samuel Tombs.
BoE governor Andrew Bailey recently warned that policymakers needed to see inflation come down sharply before ending its current monetary-tightening cycle.
