The pound jumped against the dollar this morning, after UK inflation for March beat economists' expectations, data released today by the Office for National Statistics (ONS) has shown.
British consumer prices rose 0.5 per cent year-on-year in March, ahead of expectations for a 0.4 per cent increase, and up from 0.3 per cent a month earlier.
Rises in air fares and clothing prices due to the timing of Easter were the main drivers of this, the ONS said. However, upward pressure was partially offset by a fall in food prices, as well as a smaller rise in petrol prices compared to a year ago.
In a further sign inflationary pressure is building, the core inflation rate – which strips out volatile sectors such as energy, food, alcohol and tobacco – hit 1.5 per cent.
Phil Gooding, consumer price index (CPI) statistician at the ONS, said: "After an unprecedented period of CPI being close to zero, inflation has begun to rise again."
Nevertheless, the UK's inflation rate remains way below the Bank of England's target of two per cent.
Policymakers at the Bank of England are gearing up for a rate vote later this week. They expect inflation to remain below one per cent for the rest of this year, due to the global oil price rout, the effect of past rises in sterling and weak wage growth.
Separate data published overnight showed retail sales flat-lined in March, in an early sign that a wobble in the consumer-led recovery could be on the cards.
The British Retail Consortium (BRC) said total retail sales were unchanged on March 2015, compared to a 4.7 per cent annual increase registered in this month last year.