Inflation dips on food prices

Julian Harris
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INFLATION surprisingly slowed to four per cent in March, down from February’s 28-month high of 4.4 per cent, the Office for National Statistics (ONS) said yesterday.

Consumer prices rose 0.3 per cent from February to March, yet compared to the same months last year inflation slowed by 0.4 per cent.

Food discounts by the UK’s supermarkets were largely cited for the decline. Food prices dropped by a record 1.4 per cent from February to March, the ONS said.

Core inflation, which excludes food, energy, alcohol and tobacco, dipped from 3.4 per cent in February to 3.2 per cent last month.

The retail price index (RPI), which includes mortgage payments, and the tax and prices index (TPI), which includes direct taxes, also fell by 0.2 per cent – to 5.3 per cent and 5.8 per cent respectively.

“Markets have now moved to almost totally remove the possibility of a rate hike in May or June,” said Citigroup’s Michael Saunders, following the news. “This seems rather premature in our view.”

The consumer price index average for the first-quarter of the year (4.1 to 4.2 per cent) remains slightly above the level predicted in the Bank’s last inflation report (four to 4.1 per cent), Saunders said.

“This effect from the food dip is likely to prove temporary,” said Henderson’s Simon Ward. “Food commodity prices and fuel costs have climbed more in recent weeks.”

Transport was the biggest contributor to the four per cent annualised rise in prices, with fuels and lubricants soaring by 15.9 per cent in the 12 months to March. Food prices rose 0.49 per cent over the period, despite the slip from February to March.