LONDON (AFP/APP): Britain’s annual inflation rate accelerated in March, official data showed Wednesday, stoking analyst fears of spiking prices when the nation emerges from the pandemic.
The Consumer Prices Index rate advanced to 0.7 percent last month on rising prices for clothing and motor fuel, the Office for National Statistics said in a statement.
That was slightly short of forecasts for a 0.8-percent increase, but a sizeable jump from the 0.4 percent seen in February.
The news nevertheless fanned fears that global inflation could spike this year when Britain and other nations emerge from the deadly Covid-19 health emergency.
“The UK has reached a turning point in its economic reaction to the pandemic where price growth is now on an upward trajectory, and should remain so for some time to come,” warned portfolio manager Paul Craig at Quilter Investors.
“From here, inflation may tick markedly higher if the steady drip of consumer spending morphs into a waterfall as lockdown restrictions are lifted and households spend some of their accumulated pandemic savings.”
British Prime Minister Boris Johnson’s government is targeting a phased reopening on the back of a successful vaccine drive, with non-essential retailers reopening for business last week.
Analysts remain fearful that massive global Covid stimulus, combined with pent-up consumer demand, could trigger soaring inflation and spark global interest rate hikes that damage any nascent recovery.
Yet price growth had unexpectedly declined in February as coronavirus restrictions sparked heavy discounting for clothing and footwear.
The ONS added Wednesday that discounting was still unusually high in March.
The Bank of England recently warned that UK inflation would approach its 2.0-percent target in the coming months owing to energy price hikes.
As the pandemic erupted in March 2020, the BoE slashed its key interest rate to a record-low 0.1 percent, where it has remained ever since.
AJ Bell analyst Laith Khalaf downplayed the overall impact of last month’s inflation increase.
“The spike in inflation is nothing to worry about — yet,” Khalaf said.
“We always knew inflation was going to rise once we started lapping the beginning of the pandemic.”
He added: “CPI is still way below target, and this isn’t the kind of embedded, long-term inflation that will cause sleepless nights for anyone at the Bank of England.”