U.K. Inflation Rate Hits 15-Month High

U.K. inflation accelerated to a 15-month high in March as an early Easter boosted air fares and clothing prices increased.
Consumer prices rose 0.5 percent from a year earlier, the fastest pace since December 2014, the Office for National Statistics in London said on Tuesday. That exceeded the 0.4 percent median estimate in a Bloomberg survey of economists.

Core inflation, which excludes volatile food and energy prices, quickened to 1.5 percent, the most since October 2014.
While inflation remains well below the Bank of England’s 2 percent target, the figures suggest it is picking up after almost a year of hovering around zero. Policy makers are expected to keep the benchmark interest rate at a record low until the first quarter of 2017, the median forecast in a Bloomberg survey shows. Their latest decision will be announced on Thursday.

The pound rose after the data and was trading at $1.4289 as of 9:37 a.m. London time, up 0.3 percent from Monday.
Upward pressure on inflation last month came from transport costs as air fares rose 23 percent on the month compared with 2.7 percent in March 2015. This reflected the timing of the four-day Easter break, which occurred last month but in April 2015.

There was also pressure from clothing and footwear, which rose 1 percent in March after falling in the same month last year.

Food, Fuel

This was partly offset by a drop in food prices, while motor-fuel costs rose by less than they did a year earlier.
Consumer prices rose 0.4 percent in March from February. In the first quarter, they climbed 0.35 percent from a year earlier. Services-cost inflation increased to 2.8 percent on an annual basis, while goods prices fell 1.6 percent on the year.

Another measure of inflation, the retail prices index, accelerated to 1.6 percent, the most since December 2014, from 1.3 percent in February. The index is used among other things to calculate interest-payments on inflation-protected gilts.

A separate report showed the cost of goods leaving factory gates rose 0.3 percent in March from February and fell 0.9 percent on the year. Input costs increased 2 percent, leaving them 6.5 percent lower than a year earlier.

House-price growth slowed to an annual 7.6 percent in February from 7.9 percent in January.

Bloomberg

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