Iran war drives UK inflation up to 3.3% in major blow for Reeves
The latest figures published on Wednesday revealed that UK inflation rose in March; This was a clear sign of the impact of the Iran-US war on the economy.
The latest data is the first from the Office for National Statistics to include rising petrol and diesel costs since the start of the conflict. Prices increased as a result of the closure of the Strait of Hormuz shipping corridor.
ONS figures showed Consumer Price Index inflation rose 3.3 per cent in the year to March, up from 3 per cent in February.
The increase represents a blow for Chancellor Rachel Reeves, who has made reducing living costs her top priority. The Resolution Foundation’s research has found that the average household will be £480 worse off this year due to rising energy costs.
In response, Ms. Reeves said the Iran crisis “is not our war; it is increasing the bills for families and businesses.”
He continued: “So keeping costs low is my number one priority.
“Our economic plan is sound and puts us in a stronger position to support families through this new crisis.”
Highlighting measures announced before the clashes, he said: “We cut energy bills by £117, froze rail fares and protected drivers by freezing fuel duty.
“We are taking action to protect people from unfair price increases to reduce food prices at the cash register and increase long-term energy security by building a stronger, safer economy.”
The rise in inflation also means the Bank of England is unlikely to cut interest rates anytime soon. Before the Iran war, he had signaled that he might cut interest rates two or three times this year from 3.75 percent.
This would lead to cheaper new mortgages and lower borrowing costs for businesses.
The news about inflation comes amid fears that a further escalation of conflict in the Middle East could also affect government borrowing.
The Effective Resolution Foundation found that a “serious but plausible scenario” in which the conflict would intensify and deliver the biggest blow to the economy would result in Government borrowing rising by £16bn a year in 2029-30.
RAC data for Thursday (April 16) showed that the average price of a liter of petrol in UK pre-trials was 158.1p, 25p more expensive than on February 28, when the war began.
The average price of diesel per liter was 191.2 pence, an increase of 49 pence compared to the beginning of the war.
Economists at Oxford Economics said they expected the increase in pump prices to add 0.2 to 0.3 percentage points to the inflation rate in March.
This is a breaking story – more to come
