UK inflation hits 3.3% as Iran war sends petrol costs soaring

[LONDON] UK inflation accelerated in March, as a surge in energy costs triggered by the Iran war started to hit consumers in the pocket.

The consumer prices index rose 3.3 per cent from the year-ago period, up from 3 per cent the previous month, the Office for National Statistics said on Wednesday (Apr 22).

The figure was in line with the expectations of economists.

The pickup was driven by an 8.7 per cent jump in the price of motor fuel, the largest monthly gain since 2022 – when Russia invaded Ukraine.

Services inflation, a key indicator of underlying price pressures, unexpectedly increased from 4.3 to 4.5 per cent. 

The report shows how the Middle East crisis has upended the outlook for inflation, with Brent crude close to US$100 a barrel, as the US and Iran fail to reach an agreement to end a 53-day war that has brought Persian Gulf oil and gas exports to a near standstill.

The squeeze is also threatening to ripple out beyond the petrol pump into other everyday goods and services, with domestic gas and electricity prices set to rise in July and warnings that food inflation could reach close to double digits.

Inflation had been on track to fall to the target of 2 per cent in the second quarter, clearing the way for further interest-rate cuts from the Bank of England.

Now, however, it is expected to stay at around 3 per cent and accelerate in the third quarter, raising the possibility of interest-rate increases instead. 

SEE ALSO

UK food prices and shop price inflation slow in February: survey

UK consumer spending slows in February as inflation fears dim sentiment, survey shows

UK growth slows and inflation surges amid Iran war, PMI Shows

While policymakers are expected to keep borrowing costs on hold on Apr 30 as they seek more clarity on the conflict, they have signalled they are ready to act if needed to stop the energy-price shock from spilling over into second-round effects. BLOOMBERG