UK inflation rises to 0.7% in March due to rising fuel and clothes prices
THE UK's rate of inflation rose in March but was lower than expected as the price of vehicle fuels and clothing rose.
The Office for National Statistics (ONS) said the Consumer Prices Index (CPI) hit 0.7% in March.
The rise was lower than expected, with experts predicting the rate of inflation in March would hit 0.8%.
It comes after a rise to 0.4% in February and 0.7% in January.
"The rate of inflation increased with petrol prices rising and clothes recovering from the falls seen in February," said ONS deputy national statistician for economic statistics Jonathan Athow.
"However, food prices fell back on the year, as prices of some staples were lower than at the start of the pandemic."
What does inflation matter?
INFLATION is a measure of the cost of living. It looks at how much the price of goods, such as food or televisions, and services, such as haircuts or train tickets, has changed over time.
Usually people measure inflation by comparing the cost of things today with how much they cost a year ago. The average increase in prices is known as the inflation rate.
The government sets an inflation target of 2%.
If inflation is too high or it moves around a lot, the Bank of England says it is hard for businesses to set the right prices and for people to plan their spending.
High inflation rates also means people are having to spend more, while savings are likely to be eroded as the cost of goods is more than the interest we're earning.
Low inflation, on the other hand, means lower prices and a greater likelihood of interest rates on savings beating the inflation rate.
But if inflation is too low some people may put off spending because they expect prices to fall. And if everybody reduced their spending then companies could fail and people might lose their jobs.
See our UK inflation guide and our Is low inflation good? guide for more information.
Inflation had unexpectedly slowed in February, largely because of the biggest annual fall in clothing and footwear costs since 2009.
Discounting, which is normally seen in February as retailers look to shift winter stock, eased in March but was still higher than normal for the time of year.
Fuel prices also rose in March, with the cost of petrol hitting 123.7p per litre in March 2021, up from 119.4p per litre a year ago.
Inflation is expected to increase this year, as the UK and other countries around the world ease their coronavirus lockdown restrictions.
Bank of England forecasts have inflation reaching around 2% by the end of 2021.
Pantheon Macroeconomics' chief UK economist, Samuel Tombs, believes that CPI will reach the Bank's 2% target rate as early as May.
He said: "Looking ahead, CPI inflation looks set to jump to about 1.7% in April, driven primarily by a large semi-annual increase in electricity and natural gas prices, as well as the anniversary of the collapse in oil prices at the start of the pandemic.
"April's data also will be collected after shops reopened and hospitality businesses resumed outdoor service, so the inflation rates for clothing and food service activities probably will both rise."
The ONS said that CPIH, an inflation measure that includes housing costs for owner-occupiers, rose from 0.7% in February to 1% in March.
Meanwhile, the Retail Price Index (RPI), used to calculate train ticket price rises and student loan interest, rose from 1.4% to 1.5%.
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We've explained how negative interest rates could affect your finances.
Before the latest lockdown restrictions were introduced, the economy was expected to grow in the first quarter of 2021.
In January, the economy shrank by 2.9% after taking a hit due to the third national lockdown, according to official figures.
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