July 29 2014 Latest news:
Adam Aiken, Editor
Tuesday, April 17, 2012
Inflation rose again last month, confounding predictions that it would continue to ease towards the Bank of England’s target rate.
A fall in the number of supermarket promotions helped contribute to the rise, which saw the consumer price index (CPI) hit 3.5pc in March, up from 3.4pc a month earlier.
The figures published by the Office for National Statistics put an end to five months of CPI falls.
The news is a blow to the Bank of England’s monetary policy committee (MPC), which is tasked with keeping CPI at 2pc. The MPC had predicted the fall towards the 2pc target would continue.
Vicky Redwood, chief UK economist at Capital Economics, said the halt in the downward trend “should be only temporary”.
She added: “Inflation should start to fall again before long, not least as last year’s rises in energy prices continue to fall out of the annual comparison.”
But other analysts showed more concern.
“The Bank of England’s track record of being a pretty awful forecaster is not under threat,” said Paul Dixon, of Census Financial Planning.
“This is another blow to the Bank’s credibility. Fill your tank, pop to the shops and you feel the full impact of inflation. The UK public is running on fumes.
“Even though inflation has come down since the autumn of last year, this figure is based around a basket of goods that includes things such as tablet computers.
“Our own personal inflation is likely to be considerably higher than the headline inflation figure.”
Sylvia Waycot, of Moneyfacts.co.uk, pointed to the ongoing negative impact on savings rates.
“Savers all over the country must be heaving one big sigh of frustration,” she said.
“This disappointing rise means there are now 50 standard savings accounts that negate the effects of inflation and the taxman’s cut, although the silver lining is that time last year there were only 25.
“Today’s rate of inflation means hundreds of thousands of savers need accounts paying a hefty 4.38pc before they earn a real rate of return on their savings. Yet the average no-notice savings account pays only a paltry 1.05pc, showing the size of the problem many still face.”
Rob Harbron, of the Centre for Economics and Business Research, said: “Persistently high inflation is bad news for UK households, as the rising cost of living erodes real incomes for a third year.”
He said he still thought inflation would fall during 2012, but at a much slower pace than previously thought.
“The headline rate is expected to stay above the Bank of England’s 2pc target rate for the rest of the year.”