British inflation eased to the slowest pace in over a year in March, but the fall is unlikely to persuade the Bank of England to veer from its steady course on interest rates amid soaring utility bills and oil prices.
The Office for National Statistics said on Thursday the annual rate of consumer price inflation eased to 1.8 percent in March. That was below expectations for CPI to hold at 2.0 percent, which is also the BoE's target.
Policymakers are worried that rising household bills will prompt workers to demand higher wages and put further pressure on prices, and have said they need to monitor these developments given signs of a sharp pick-up in inflation expectations.
The ONS said the largest downward effects on British CPI in March came from food and non-alcoholic drinks prices, which fell 0.4 percent on the year, the weakest outturn since November 2004.
Within that, milk cheapened by an average 2 pence per pint ($0.06 per litre) following reported price cuts at several supermarkets. There were also large downward effects from air fares falling and petrol pump prices holding steady, after rises a year ago.
However, economists said that with oil touching new highs of over $74 a barrel, petrol pump prices were also set to increase. Indeed, the price of some grades of unleaded petrol have already been pushed over 1 pound per litre this week.
And the ONS said there was a large upward effect on CPI from household bills following hefty price hikes by major utility firms, with the housing, water, electricity, gas and other fuels component up at its sharpest annual rate in at least nine years.
Meanwhile, core inflation, which excludes food, energy, alcohol and tobacco, eased to 1.3 percent in March from 1.4 percent.
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