UK CPI remains flat in March

Highest level since May 2012.

New Statesman
Inflation eased at the fuel pumps. Photograph: Getty Images.

Consumer price inflation (CPI) in the UK remained unchanged at 2.8 per cent in March compared to February, according to the figures released by the Office for National Statistics (ONS) today.

Inflation remained above the Bank of England’s (BoE) 2 per cent target since December 2009.

Upward pressure came from books, digital cameras, DVDs and car insurance, while inflation eased at the fuel pumps as petrol prices rose by 2.2p a litre against 3.3p a litre a year earlier. Diesel increased by 1.9p a litre compared with 2.6p last March.

ONS figures also show signs that producer price pressures were easing. Factory gate inflation grew by an annual 2 per cent.

David Tinsley, economist at BNP Paribas told the BBC, that the inflation figure was in line with his expectations. “But nonetheless inflation remains above target and it's going to take a number of years to bring it back to target.”

Philip Shaw at Investec told BBC: “This is about as close to consensus as you're likely to get. Our view remains that CPI will move above 3 per cent in the coming months. “The big question is whether the MPC will look through this and become more aggressive on quantitative easing. We suspect it will,” Shaw said.

Retail prices index (RPI) increased to 3.3 per cent in March, compared to 3.2 per cent in February.

Furniture prices also grew at a slower pace than a year ago, while cheaper vodka and lager helped see a 0.5 per cent fall in alcoholic drink and tobacco costs.

BoE expects inflation to exceed 3 per cent later in 2013. In the longer term, the bank expects inflation to remain above its 2 per cent target until early 2016.