Inflation jumps to 3.4% in March
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Inflation jumped to 3.4 per cent in March up from 3 per cent in February forcing Bank of England governor Mervyn King to write to the Chancellor for the second time in 2010.
According to the Office of National Statistics, the Consumer Price Index jumped 0.4 per cent while the Retail Price Index rose to 4.4 per cent, up from 3.7 per cent in February.
This is the second time inflation has been recorded above the 2 per cent target set by the central bank this year. In its last inflation report, the Bank of England stressed that a rate rise was unlikely for much of this year as inflation would naturally fall through 2010.
The ONS says the jump came from low gas prices in 2009 and also reflects the 1 per cent drop in inflation in March 2009. The RPI rise was mainly driven by mortgage interest payments. But Schroders European economist Azad Zangana says a weakened pound has also forced up inflation.
He says: “Though the gas price story is an important contributor to this morning’s surprise, weakness in sterling also appears to be forcing firms to raise prices on their imported goods.”
Travelex head of the UK trading desk Mark Bolsom says March’s leap calls into question the Bank of England’s predictions. He warns that the markets will now want clear direction from policymakers on how they intend to deal with the inflationary pressure.
He says: “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 UK is an import based economy. There is a significant downside to a weaker pound, as illustrated by this data.”
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Readers' comments (3)
Steve Abbott | 20 Apr 2010 12:16 pm
Looks like there is more bad news on the way. Figures published by The British Population Survey indicate that when the Official Unemployment figures are published tomorrow they will show a rise, probably to just over 8%.
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Mr J Munderstanding | 20 Apr 2010 3:15 pm
What i don't understand is what mr so called cameron would do any different to keep this undercontrol, maybe its time for a bit of healthy inflation to help house market recover. mr brown and mr clegg must be laughing in thier graves
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Mock Spannings | 20 Apr 2010 4:10 pm
I'll tell you one thing these conservatives we absolutly top at, high interest rates and high inflation and high unemployment. 3 highs for the price of 1, this is what this country is going to let its self in for with a cameron vote.
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