UK inflation as measured by the Consumer Prices Index rose to 0.5% in March, according to the Office for National Statistics.
Inflation is now at its highest level since December 2014, but it remains below the Bank of England’s 2% target, and the Bank has said it expects inflation to stay below the 1% mark this year.
Maike Currie, investment director for personal investing at Fidelity International, said:
“March’s inflation figures showed a higher than expected rise in consumer price data over the last 12 months to 0.5%, resulting in UK inflation reaching its highest level since December 2014. Rising air fares, an increase in the price of clothing and restaurant and hotel bills, were the main contributors to the increase. 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 rise in petrol prices than a year ago.
“While today’s figures see UK inflation move further into positive territory, we remain far away from the Bank of England’s 2% target. Today’s increase is unlikely to spur the Bank of England into considering raising interest rates on Thursday with widespread consensus that this week will see the 85th consecutive month that the bank keeps interest rates on hold at their emergency level of 0.50%. Markets are expected to take little encouragement from this decision.
“Meanwhile, the jury is still out on whether central banks’ experimentation with negative interest rates will enhance or constrain economic growth. There’s no disputing that in an environment of record low and sub-zero interest rates, it is increasingly challenging for savers and investors to find decent returns. Against this backdrop, investors are likely to continue to favour assets such as commercial property and equity income as safe havens and rare sources of yield.”