Sterling rose after inflation data showed UK consumer prices remained above the Bank of England’s 2% target in March.
According to the Office for National Statistics, the annual CPI figure came in at 2.3% last month, as was widely expected, and was the same rate of increase as in February when CPI rose at the fastest since June 2013. That was the first time inflation exceeded the BoE’s 2% target in more than three years.
The pound jumped to high of $1.2444 soon after the data, up from $1.2410 before the data. The EUR / GBP pair fell to 0.8520, from around 0.8537 beforehand.
Food, drink and clothing prices all rose in March, with food prices experiencing the biggest annual increase in three years last month. However, the price increases in these categories were offset by lower airfares as the later timing of this year’s Easter holidays pushed down the cost of flight tickets. A drop in petrol prices between February and March also exerted downward pressure on the headline CPI.
Meanwhile core CPI slowed from 2% to 1.8% year-on-year in March, which was slightly below economists’ expectations of 1.9%.
Thanks to the weakening of the pound since last June’s Brexit vote, inflation has accelerated in Britain in recent months. According to BoE forecasts, inflation will peak at 2.8% by this time next year.
But the result of fast rising inflation in recent months has squeezed household spending. Wage data for February will be released on Wednesday. The previous average earnings data showed wages rising at an annual rate of 2.2% in the three months to January. They are forecast to come in at 2.1% for February’s report due tomorrow. This would indicate that average real wages are falling.
Origin: XM
