British inflation picked up in March as global oil prices rose and retailers scaled back their COVID-driven discounts; it is expected to keep climbing as the economy reopens from lockdown.
Consumer price inflation rose to 0.7% in March after dipping to just 0.4% in February, slightly below the average forecast of 0.8% in a Reuters poll of economists, according to official figures published on Wednesday. British inflation is forecast to rise in the coming months, due to an increase in regulated household energy bills in April, higher global oil prices and comparisons with prices a year ago when COVID lockdowns caused demand to slump.
Fuel prices in March showed their biggest annual increase since January 2020. Clothing and footwear prices rose by 1.6% on the month after store closures caused by lockdown rules had caused discounting in February, the biggest increase since 2017 for the time of year. Clothing and footwear prices were still 3.9% lower than a year before, and food prices were 1.4% down. The Bank of England forecast in February that inflation would reach 1.9% by the end of 2021, but many economists now expect it will exceed its 2% target before then. In the medium term, the BoE sees less upward pressure on inflation because of weakness in the job market, which it expects to persist even after the economy returns to its pre-pandemic size, which it has forecast will happen early next year.
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