UK inflation is expected to hold at around 3 per cent this week, but will soon rise as the fallout from the Iran conflict begins to feed through to household bills.
Economists broadly agree the headline rate of the consumer prices index (CPI) measure of inflation will remain roughly unchanged when February’s reading is revealed on Wednesday.
Deutsche Bank expects the figure to remain at 3 per cent, while Pantheon Macroeconomics expects a small fall to 2.9 per cent, from January’s 3 per cent figure.
Clothing and other core goods are expected to rise at a faster rate than in the previous reading, while hotel prices and some leisure costs will rise at a slower rate.
Airfares are also expected to rise sharply, with Deutsche Bank expecting a 7.5 per cent monthly rise, adding to the overall total, but not enough to shift the headline rate away from 3 per cent.
On the surface, that suggests inflation is stable, but February’s figures capture a moment before global events began to reshape the outlook.
Since the end of February, the Iran conflict has sent energy markets sharply higher. Oil prices are “tracking around 47 per cent higher than pre-conflict levels” and gas futures have “risen over 90 per cent during that same period”, according to Deutsche Bank.
Those increases will not yet appear in the official data but are likely to push up inflation in the months ahead.
For households, rising oil prices affect petrol and diesel costs quickly, and will show up in the next reading, while energy prices will go higher from July, when the price cap set by Ofgem is likely to increase.
Businesses facing higher energy and transport costs often pass at least part of those increases on to consumers.
That can show up in everything from food prices to restaurant bills, making inflation feel more persistent even if the headline rate moves only gradually.
Deutsche Bank said, “the inflation outlook has rarely been more uncertain than it is now”, warning that energy is likely to create another upswing, or “hump”, in inflation over the summer.
Pantheon also expects inflation to rise again later this year, to 3.2 per cent in March. It then expects a peak of around 3.8 per cent in September.
On Thursday, the Bank of England warned inflation was expected to be around 3 per cent in the period from April to June rather than 2.1 per cent, as it had predicted in February.
Deutsche Bank said there is a “high likelihood that government support can help curb energy inflation.”
Any intervention would affect how much of the global price shock is passed on to households.
For now, February’s data is likely to show what Deutsche Bank describes as “the drop before the jump”. Energy prices are expected to have fallen on the month, temporarily holding inflation down.
This backdrop helps explain the Bank of England’s decision on Thursday to hold interest rates at 3.75 per cent.
Most forecasters now no longer expect a cut to interest rates later this year, and they could even rise if the situation in Iran worsens.
Hence then, the article about inflation to stay at 3 before rising even higher in spring was published today ( ) and is available on inews ( Middle East ) The editorial team at PressBee has edited and verified it, and it may have been modified, fully republished, or quoted. You can read and follow the updates of this news or article from its original source.
Read More Details
Finally We wish PressBee provided you with enough information of ( Inflation to stay at 3% – before rising even higher in spring )
Also on site :
- Explosion, fire at Erbil high-rise amid Iranian attacks
- Target’s Set of 2 Comfy Patio Chairs From a ‘Brady Bunch’ Star’s Brand Will Instantly Elevate Your Outdoor Space
- Long lines, unpaid TSA workers: Experts say US air travel system in crisis