Money News
CPI annual inflation - the Government's target measure - was 3.1% in March, up from 2.8% in February, according to new figures from the Office for National Statistics. In response to the highest annual rate since the series was first compiled in January 1997 the pound went through the $2 barrier as the likelihood of another rise in interest rates next month became a near racing certainty. Some traders are now even suggesting there may be two rate hikes this year. And that will be further bad news for borrowers.
Meanwhile, the Bank of England will have to write a letter of explanation to the Government after the latest CPI number breached the 3% barrier. Its annual self imposed target is 2%.
The largest upward effect on the CPI annual rate came from food and non-alcoholic beverages. Shop-bought milk prices increased by over 2% in March, compared with a fall of around 8% last year when supermarkets cut prices. Small upward effects also came from bread, cereals and meat, where prices rose in March but fell a year ago.
A partially offsetting downward contribution came from fruit, as prices fell by more than a year ago.
Further large upward contributions came from furniture, household equipment and routine maintenance, where the monthly increase in prices for furniture and furnishings in March was a record at around 10%.
Also contributing was transport, where petrol prices rose by nearly 2.5p per litre in March compared with little change a year ago.
Counterbalancing this were decreases in housing and household services, mainly due to gas and, to a lesser extent, electricity. Gas prices fell over the month and electricity prices showed little change. In March 2006, tariffs for both gas and electricity rose by around 3%.
Elsewhere, RPI inflation rose to 4.8% in March, from 4.6% in February and was influenced by many similar factors to those that affected the CPI. Housing costs that are excluded from CPI had a small upward contribution to the change in the RPI annual rate, mainly due to depreciation costs, which rose this year but fell a year ago, reflecting movements in the smoothed house price index used to calculate this component.
RPIX inflation - the all items RPI excluding mortgage interest payments - was 3.9% in March, up from 3.7% in February.
17 April 2007 © Moneyextra.com
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