U.K. Inflation Edges Lower, but Persists in Double Digits

Britain’s inflation rate slowed in March, but less than economists expected, holding the rate stubbornly high in the double digits.

Consumer prices rose 10.1 percent in March from a year earlier, the Office for National Statistics said on Wednesday, a slightly slower pace than the 10.4 percent in February. But economists had expected the country’s inflation rate to drop below 10 percent for the first time since the summer.

Britain’s annual inflation rate peaked at 11.1 percent in October but its downward trend was disrupted in February, when the rate unexpectedly ticked higher. The Bank of England then raised interest rates for an 11th consecutive time in March, to 4.25 percent.

The return to inflation’s downward path might provide some limited relief to households and policymakers, but Britain’s cost-of-living challenges are still stark. Food prices rose about 19 percent in March from a year earlier, with bread, meat and cooking oils continuing to climb quickly. Bread and cereal price inflation is at a record high, according to the statistics agency. Core inflation, a measure that excludes food and energy prices, which tend to be more volatile, was 6.2 percent, the same as the previous month.

And the headline rate of inflation is still high compared with international peers. In the United States, the Consumer Price Index moderated in March, rising 5 percent from a year earlier, while the eurozone’s inflation rate eased to 6.9 percent.

While inflation is expected to slow sharply later this year because of lower energy prices, uncertainty remains about how quickly the pace of price increases will return to the central bank’s 2 percent target. Policymakers at the Bank of England have been closely monitoring private-sector wage growth and prices in the service sector for signs of how deeply inflationary pressures are becoming embedded in the economy.

On Tuesday, data from the statistics agency showed that wages excluding bonuses rose 6.6 percent in the three months to February, compared with the same period a year earlier, beating economists’ expectations. But there were also signs that Britain’s labor market was beginning to loosen, supporting bets that the Bank of England is close to halting rate increases. In February, for a second consecutive month, the pace of wage growth in the private sector slowed slightly, while the number of job vacancies fell and more people returned to the work force, Tuesday’s data showed.

Services inflation, which is heavily influenced by companies’ wage costs, held steady at 6.6 percent.

The Bank of England’s policymakers will meet again in early May to decide whether to raise interest rates again.