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.”