UK inflation remains above Bank of England target

11 Apr 17

The UK’s inflation has remained at 2.3% - above the Bank of England’s target of 2% - according to the latest ONS figures.

Food, alcohol and tobacco, clothing and footwear, miscellaneous goods and services prices went up.

But these were largely offset by lower costs for transport, particularly air fares and, to a lesser extent, motor fuels. 

The consumer price inflation bulletin out today shows the inflation rate was unchanged from February to March – holding at the highest level since September 2013.

The rate has been steadily increasing following a period of relatively low inflation in 2015.

Think-tank the Resolution Foundation said while inflation had stopped rising in March it would not stop Britain’s pay squeeze.

Stephen Clarke, economic analyst at the Resolution Foundation, said: “The recent run of escalating inflation may have paused for now, but that has more to do with the timing of Easter than any change in the strong upward pressure on prices that is likely to dominate through 2017.

“The result of fast rising inflation in recent months is that Britain’s pay squeeze looks set to have returned – six months ahead of schedule.”

He predicted the pay squeeze to be “deeper and longer than expected” as prices were expected to rise later this year and wages looked unlikely to increase with them.

“The fact that wages are falling at a time when inflation is still relatively low and unemployment is at its lowest level in 40 years, shows just how catastrophic Britain’s productivity failure is for pay packets and living standards,” Mr Clarke said.

The foundation projects real pay growth is expected to have fallen to around 0.1% in the three months to February, despite the inflation figure holding at 2.3%.

Real pay would turn negative in the first quarter of 2017 as a whole, ahead of the Office for Budget Responsibility’s projection it would turn negative in the third quarter of this year, the think-tank believes.

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