UK inflation jumped in March, driven by the higher cost of petrol and clothes in a signal that prices are moving to an upward trajectory as the economy recovers from the coronavirus pandemic. The Office for National Statistics (ONS) said the consumer prices index rose to 0.7% last month, up from 0.4% in February. The increase was slightly below the 0.8% forecast by City economists. However, the cost of food fell back on the year, as some staples such as bread, cereals and chocolate biscuits were cheaper than at the start of the pandemic. Economists expect inflation to rise further after lockdown amid a burst of pent-up demand for goods and services, fuelled by £180bn in additional savings built up by mainly wealthier households while large parts of the economy were closed. Andy Haldane, the Bank of England’s outgoing chief economist, has likened the risks from inflation to a “tiger” that could be easily roused, raising the prospect of higher interest rates from the central bank. To keep inflation low and stable, the government sets Threadneedle Street a target to steer inflation to 2%. The Bank forecasts inflation will reach 1.9% by the end of 2021. However, many economists expect it will exceed the 2% target before then. Supply pressures linked to disruption to global trade – caused by Covid-19 restrictions and Brexit – are also expected to push up inflation, as well as the increase in Ofgem’s energy price cap in April, rising oil prices and the end of the government’s VAT cut for hospitality and tourism.

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