Inflation rose to a 30-year high last month, adding pressure to households already struggling with the soaring cost of living.
A record surge in fuel prices pushed inflation to 7 per cent in March as consumers felt the impact of the war in Ukraine on living costs, according to the Office for National Statistics.
The price of oil and gas spiked after Russia’s invasion at the end of February, pushing up the price of energy, transport and raw materials for businesses. The 9.9 per cent rise in the cost of fuel is the largest monthly rise on record.
There were price rises across the board, with the cost of eating at restaurants or staying at hotels increasing by its biggest monthly amount since records began in 1988. The price of clothing and footwear, which began to rise after lockdown restrictions were lifted, increased by 9.7 per cent in the year to March.
Inflation is rising faster than the Bank of England expected. Officials on the central bank’s rate-setting committee said in February, before the Russia-Ukraine war broke out, that prices would be rising at an annual rate of 6 per cent in March. Its target for inflation is 2 per cent.
Alpesh Paleja, lead economist at CBI, which represents businesses, said: “The latest rise in inflation will not be the last. We’ll see another jump over April as the rise in Ofgem’s energy price cap comes into effect. Beyond this, volatility in global commodity prices and ongoing supply chain disruption will continue to stoke price pressures.”
Household energy bills rose by an average of 54 per cent in April. The rise, coupled with tax rises which came into effect at the same time, is expected to push up the cost of living even further.
The rise in energy bills alone will add 1.6 percentage points to the current level of inflation in April, according to economists at the Capital Economics consultancy, who expect inflation to reach 8.5 per cent this month.
Ruth Gregory, senior UK economist at Capital Economics, said: “While we suspect April could mark the peak, we think inflation will remain above 7 per cent for most of 2022 and above 3 per cent for most of 2023. With high inflation feeding into price-wage decisions, we think the Bank of England will have to raise rates further than it expects, perhaps to at least 2 per cent next year.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, expected the jump in inflation to “seal the deal” on a quarter-point increase in interest rates at the monetary policy committee’s next meeting in May.