UK inflation drops slightly in March
UK inflation dropped to 10.1% in March, according to the Office for National Statistics. While this is a slight improvement from the 10.4% recorded in February, it is still in double digits, and prices are still rising albeit at a slower rate. The main reason for this is the rocketing cost of food, with food inflation now at 19.2% the highest in over 45 years.
What does this mean for households?
When inflation is high, prices rise more quickly than usual. This means that the cost of everyday essentials such as food and fuel can become unaffordable for many households. While the price of fuel fell by 5.9% in the year to March 2023, food prices continued to rise sharply. The cost of supermarket basics such as bread and cereal is at a record high.
What is the BoE doing about it?
The Bank of England (BoE) has taken decisive action to combat high inflation by raising interest rates for the eleventh consecutive time since December 2021. By doing so, the Bank aims to alleviate price pressures by reducing demand. However, this move may lead to higher borrowing costs for households and businesses, with potential ripple effects on the wider economy.
What caused inflation to rise in the first place?
Inflation rates have been on the rise, with energy prices and food costs being the main culprits. The demand for energy has increased significantly following the lifting of Covid-19 restrictions. Unfortunately, the situation worsened due to the Russian invasion of Ukraine in February 2022, which caused wholesale energy prices to skyrocket.
Consequently, household bills rose sharply, peaking at £1,971 in April of the same year. Additionally, the cost of food has been consistently increasing, leading to a record-high food inflation rate.
What does the future hold?
While inflation is expected to fall throughout the rest of the year, this depends on the level of prices being set in stores. The Bank of England predicts that inflation will fall sharply from the early summer. However, it is worth bearing in mind that inflation can have long-lasting effects on the economy and people's lives.
In conclusion, while the slight decrease in inflation is welcome news, it is important to remember that prices are still rising particularly when it comes to food.