Tags: EU | Britain | Economy

U.K. Consumer Price Inflation Rises to 3.4 Percent

Tuesday, 20 Apr 2010 06:53 AM


Higher prices for housing pushed consumer price inflation to 3.4 percent in March, up from 3 percent in February, official statisticians said Tuesday.

The inflation rate has soared above the government's official 2 percent target even as the economy slowly recovers from six quarters of a deep recession. However, analysts believed rising inflation would not prompt the Bank of England to raise interest rates.

"We would not expect the Bank of England to be swayed by short-term movements in commodity prices, so today's figures should not have much bearing on interest rates. We still expect rates to remain on hold for the remainder of this year," said Hetal Mehta, senior economic adviser to the Ernst & Young ITEM Club.

The retail prices index, which includes the cost of mortgages and housing, rose to 4.4 percent in March, the highest level since September 2008, the Office for National Statistics said.

The retail prices index excluding mortgage interest payments rose from 4.2 percent in February to 4.8 percent in March, the agency said.

The ONS said costs for housing and household services dropped between February and March, but remained 14 percent above the previous year's level.

Transportation costs were up 11.3 percent compared to a year ago.

Inflation has also been driven by the increase in Britain's broad-based Value Added Tax from 15 percent last year to 17.5 percent on Jan.1.

Although rising inflation will cause some concern for Bank of England rate-setters, IHS Global Insight economist Howard Archer said the bank is unlikely to raise the base rate in the near term from the all-time low of 0.5 percent.

"Consumer price inflation is likely to hover around 3.0-3.5 percent in the near term due to unfavorable base effects resulting from the marked retreat in inflation a year ago when the recession was at its deepest. However, consumer price inflation will hopefully be firmly on a downward path by the end of the second quarter," Archer said.

James Hughes, chief economist at Black Swan Capital, took a more pessimistic view.

"The U.K. economy has some very deep, fundamental problems that won't be solved simply by installing a new government, and this sharp increase in UK inflation to 3.4 percent is possibly just the start of an inevitable and unstoppable slide towards double-digit inflation and interest rates within the next few years," Hughes said.

Marl Bolsom at Travelex Global Business Payments said rising inflation showed the downside of the pound sterling's weakness.

"This data adds to the confusing economic outlook — on the one hand, we need a weaker pound to boost our export-led growth, but on the other hand, the U.K. is an import based economy," Bolsom said.

© Copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
Zip Code:
Privacy: We never share your email.
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Christians Under Siege in Iraq

Monday, 28 Jul 2014 10:07 AM

By now, all Christians living in the second largest city of Iraq, Mosul, have been removed, their belongings stolen, the . . .

Iraq Mess Due to Obama's Policies

Monday, 16 Jun 2014 09:38 AM

In his remarks about the invasion of Mosul, Tikrit , and most of the Sunni triangle of Iraq , by the “Islamic State of I . . .

D.C.'s Strategic Mistake in Iraq: Abandoning Iran's Opposition

Thursday, 08 May 2014 16:22 PM

It has already been established, including in my recently published book, "The Lost Spring: U.S. Policy in the Middle Ea . . .

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

America's News Page
©  Newsmax Media, Inc.
All Rights Reserved