UK inflation rises to 3.3% as Iran war impact begins to hit
Economists polled by Reuters had mostly expected inflation to rise to 3.3% in March, driven by increases in the cost of oil and other fuels.
The Bank of England has said Britain’s inflation rate – the highest in four years among Group of Seven economies – will be close to its 2% target in April before the US-Israeli war against Iran begins on February 28.
Also Read: India faces inflation spillover risks from Middle East conflict: RBI
However, the BoE last month sharply raised its inflation forecast due to the energy price shock, predicting that it would rise to 3.5% by mid-2026. The International Monetary Fund predicted last week that UK inflation would peak at 4% in the coming months.
However, the BoE’s interest rate setters have mostly said it is too early to know what a rise in headline inflation will mean for underlying price pressures in the economy, given the weak labor market that could make it harder for workers to demand higher wages or for businesses to absorb higher costs.
The British central bank is expected to put borrowing costs on hold at the end of its next Monetary Policy Committee meeting on April 30.Also Read: WPI inflation reached 38-month high at 3.9% in March as rising energy and crude oil prices pushed up costs amid West Asian war
Financial markets on Tuesday were betting on the BoE to raise interest rates by one or possibly two quarter points this year. However, a Reuters poll of economists showed that most expect no change in borrowing costs in 2026.
