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UK inflation rises to 15-month high of 0.5%

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12/04/2016
UK inflation rose unexpectedly in March to 0.5%, up from 0.3% in February, according to the Office for National Statistics (ONS).

It is the highest rate of Consumer Price Index (CPI) inflation since December 2014, but is still a long way off the Bank of England’s official target of 2%.

Economists had expected a smaller uptick to 0.4%.

Rises in air fares and clothing prices were the main contributors to the increase in the rate between February and March. The earlier than usual Easter break is also expected to have played a part.

However, any chances of a bigger increase in March’s inflation figure were dampened by falling food prices and smaller rises in petrol prices than a year ago.

While today’s figure sees inflation move further into positive territory, talk of higher interest rates on the back of today’s data would be premature, according to Ben Brettell, a senior economist at Hargreaves Lansdown.

“Although inflation rose by more than expected, the overall trend remains weak, and places little pressure on the MPC [Monetary Policy Committee]. Core inflation, which strips out volatile components like food and energy, rose to 1.5% in March, but this is still significantly below the Bank’s 2% CPI target. The Bank said in February it expected inflation to undershoot the target until 2018.”

It is widely expected that Thursday’s MPC meeting will see the 85th consecutive month that the Bank keeps interest rates on hold at the record low level of 0.5%.

Today’s data was welcome news for the pound, which rebounded slightly having fallen to its lowest level in more than two years against a basket of global currencies last week.

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