The UK’s Consumer Price Index rose to 3.3 per cent in March by year-on-year comparison, suggesting the first effects of higher energy prices following the US-Israeli war in Iran are beginning to come through.
The full impact of conflict in the Middle East is unlikely to be reflected yet, with further pressure on household bills expected in the months ahead.
Mike Ambery, retirement savings director at Standard Life, says: “Today’s inflation figure suggests that price pressures are starting to pick up against the backdrop of war in the Middle East, with the initial impact of volatile wholesale energy markets starting to feed through.
“However, this is unlikely to show the full picture. Energy prices have continued to rise into April, and their impact on the UK energy price cap, due to be updated in July, as well as on everyday costs like transport, food and other essentials, is still working its way through.”
Food and non-alcoholic beverages rose 3.7 per cent across the month, while clothing and footwear actually fell by 0.8 per cent.
There was more than a 0.25 per cent jump in inflation for transport services, reflecting fuel hikes and energy insecurity.
The highest month in the last five years for inflation according to the CPI was the 11.1 per cent jump in October of 2022, following the Covid pandemic and resulting stimulus payments into a low activity economy.
Adam Gillespie, a partner at XPS Group, says: “Whilst many have already felt the impact of rising inflation at the petrol pump, the bigger worry for the UK economy, and for individuals, is what comes next. Energy bills are set to rise further from July, and food prices could follow.
“For DC savers, the picture is more mixed. Higher than expected inflation can weigh on gilts and other assets in the short term, but over longer periods the outlook is less certain underlining the importance of diversification. The risks members face in retirement are not just about pot size – features such as inflation protection are a necessity.”
