Official figures from the Office for National Statistics put UK inflation at 2.3% during March 2017 for the second month. This means it’s at its highest level in almost three years.
It also means that inflation stays above the Bank of England target of 2% – this is as measured by the Consumer Prices Index (CPI) inflation.
UK inflation was at 1.8% in January 2017. Based on the trend over the last 12 months, it looks like inflation will continue to increase gradually throughout 2017 and could even hit 3% by the summer.
Why has UK inflation stayed the same?
The reason that UK inflation hasn’t changed this month is due to opposing pressures – things that have got more expensive and are pushing inflation up and things that have got cheaper and are pushing it down.
One of the areas where prices have gone up the most is food and non-alcoholic drinks. They now cost an average of 0.4% compared to February 2017. When we look at the picture a year ago, prices for food actually fell by 0.6%
CPI inflation rate from March 2007 to March 2017
Source: Office for National Statistics
The main thing keeping CPI down is cheaper air prices. These are down 4% from the month before.
But the data doesn’t give the full picture here – the reason that air fares were down is because Easter fell in March in 2016. As it’s in April this year, air prices are likely to pick up over the next few weeks. This means that it’s more than likely that we’ll see a jump in UK inflation next month.
Petrol prices dipped slightly in March 2017, another reason why inflation rates stayed steady. When we look at the stats compared to this time last year, fuel costs were actually up 17%.
“Food, drink and clothing prices all rose in March. However, this is offset by air fares, which fell slightly but last year rose substantially thanks to the timing of Easter. The costs of raw materials and the price of manufactured goods leaving factories were both little changed, as falling fuel prices helped stem further rises.”