LONDON (Reuters) – UK inflation slowed less than expected in March and the country is the only country in Western Europe to record double-digit inflation last month, data showed on Wednesday. , which reinforces the scenario of a further rate hike by the Bank of England (BoE) in May.

Consumer prices in the UK slowed to 10.1% year on year, after rising 10.4% in February, the Office for National Statistics (ONS) said.

Economists polled by Reuters predicted a slowdown to 9.8% in March from a 41-year peak recorded in October at +11.1%.

In detail, prices for food and non-alcoholic beverages jumped 19.1% in March, the biggest increase since August 1977. Prices for milk, sugar and olive oil increased by around 40% over one year.

Despite the slowdown in consumer prices seen in March, Britain’s inflation rate remains the highest in Western Europe, while the country is the only one in the region to post a double-digit rise last month. figures.

These data suggest that Britain could suffer from high inflation for a longer period than other countries due to a drop in the labor force following the COVID-19 pandemic. , heavy dependence on natural gas for electricity and heating, and Brexit-related tensions.

Core inflation, which excludes volatile energy and food prices, held steady in March at 6.2%, while the Reuters consensus had forecast a slowdown to 6.0%.

Investors are now pricing in a 95% probability of a BoE rate hike next month, up from an 80% probability on Tuesday.

The pound rose against the dollar and UK government bond prices fell to their lowest level since the beginning of March.

PERSISTENT INFLATION

“It is now clear that the UK faces a deeper and more persistent inflation problem than the rest of Europe and the US,” said Ed Monk, managing partner at the asset manager. Fidelity International.

“Price rises are proving harder to neutralize and the Bank of England is almost certain to raise borrowing costs further by at least a quarter point,” he added.

Services inflation, which is an indicator of domestic price pressure, also did not decline in March.

“These numbers underscore exactly why we need to continue our efforts to bring inflation down to ease the pressure on households and businesses,” Finance Minister Jeremy Hunt said.

Last week, the International Monetary Fund (IMF) reported that UK inflation would average 6.8% this year, the highest rate of any major advanced economy.

Last month, the BoE said it expected inflation to “decline significantly” in the second quarter. In February, it had forecast inflation of 9.2% in March.

(Report Andy Bruce and David Milliken; Claude Chendjou, edited by Bertrand Boucey and Blandine Hénault)

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