UK inflation jumps to 3.3% in March as fuel prices surge

Preliminary data from the Office for National Statistics (ONS) on Wednesday showed UK inflation jumped to 3.3% in March as the Iran war led to a sharp rise in fuel prices.

Economists polled by Reuters had expected the inflation rate to rise from 3% to 3.3% in the 12 months through February. Latest data is the first hard evidence of the impact of the Iran war on consumer prices in the UK

ONS chief economist Grant Fitzner said on Wednesday that the rise in inflation was largely driven by a rise in fuel prices, which was the biggest rise in more than three years.

“In addition to increasing food prices this month, flight tickets have also increased.” In a post on X he said:.

“The only significant offset came from clothing costs, where prices increased less than this time last year. The monthly cost of both raw materials for businesses and goods leaving factories has increased significantly, driven by higher crude and oil prices,” Fitzner said. he added.

The sharp rise in energy prices following the Iran war is blamed for renewed inflationary pressures, and economists expect costs to rise further as the conflict continues.

“Prices at the pump and heating oil prices are likely to see a big increase at the end of the quarter as the Iran conflict spills over onto UK shores,” Sanjay Raja, Deutsche Bank’s chief UK economist, said in an emailed comment ahead of the data release. he said.

As a net energy importer, the UK is particularly vulnerable to global energy price shocks caused by conflicts in the Middle East.

Before the war began on 28 February, the Bank of England was expected to cut interest rates as inflation cooled towards the 2% target.

Economists say the central bank could raise interest rates, but that remains a close call on whether policymakers will do so when they next meet on April 30.

majority Economists surveyed by Reuters While last week they expected the BOE to keep interest rates unchanged for the rest of the year, they argued that policymakers would choose to “examine” the rise in inflation caused by external factors. BOE rate setters will also avoid encouraging “stagflation” (slow growth, high inflation and rising unemployment) if they raise rates.

With US President Donald Trump extending the fragile ceasefire with Iran on Tuesday, all eyes turned to the developments in the Iran war. However, the possibility of continuation of peace talks is uncertain due to the suspension of the second round of talks planned to be held in Pakistan this week.

“An extended ceasefire will not prevent a painful period of accelerating inflation as skyrocketing energy costs and food prices push the headline rate above 4% in the autumn despite slowing economic demand,” ICAEW chief economist Suren Thiru said on Wednesday. he said.

“While these figures may make uncomfortable reading among policymakers, the looming downward pressure on prices from a weakening economy should provide rate-setters with sufficient latitude to capitalize on this period of intensified inflation and keep rates steady.”

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