By Geoffrey Smith
Investing.com -- The worldwide surge in energy and food prices struck again on Wednesday, driving U.K. inflation to its highest in over 30 years in March and adding to a growing cost-of-living crisis in the country.
Prices at both the consumer and producer level both surged by more than expected for the sixth month in a row, pushing the annual rate of consumer inflation to 7.0% and leaving factory gate inflation at 11.9%. In month-on-month terms, consumer prices rose 1.1% and producer prices rose 2.0%.
As in many countries, prices are rising considerably faster than wages. Data released on Tuesday showed that average earnings including bonuses rose 5.4% in the year through February.
The numbers are likely to get even worse in April, as a big jump in regulated household energy prices comes into effect. The timing of that is particularly awkward for the U.K. government, which also implemented an increase in national insurance contributions from April 1. A subsequent cut in income tax the Chancellor of the Exchequer Rishi Sunak may cushion that blow a little, however.
The figures come a day after inflation in the U.S. hit a 40-year high of 8.5%, due largely to gasoline, food and housing prices, and on the same day that the Reserve Bank of New Zealand became the first major advanced economy central bank since the start of the pandemic to raise its key rate by 50 basis points.
As such, the Bank of England is likely to come under fresh pressure to act more aggressively to bring inflation down. After its latest interest rate hike, the Bank had signaled that it expected the economy to cool by itself later in the year, making the prospect of continued increases in rates less likely. The pound was nonetheless little changed at $1.2995 by 2:45 AM ET (0645 GMT), however.
Simon French, chief economist with Panmure Gordon, said via Twitter) that he saw "nothing in today's UK CPI release for March to change our view that CPI will peak this year at around 10%."
He highlighted "signs of a broadening of inflationary pressures amongst core items and a big leap in input costs."
French said he thought the most likely path for the BoE at its May meeting is still a 25 basis point hike and the announcement of a path for unwinding its purchases of U.K. government bonds. However, he said that global developments make a 50 basis point hike "no longer a long shot."