The Office for National Statistics said rising petrol, heating oil and pricier airfares pushed UK consumer inflation to 3.3% in the year to March, up from 3.0% in February. Analysts said the increase reflected a near-term energy shock and a surge in travel costs around the timing of Easter.
Fuel and travel pushed headline higher
The Office for National Statistics release showed consumer price inflation climbed to 3.3% in the year to March, up from 3.0% in February. Analysts said higher fuel costs and a jump in travel prices were the clearest drivers.
Petrol and diesel prices rose notably in March, while heating oil also spiked in the weeks around the outbreak of regional hostilities, feeding through to the liquid‑fuels components of household energy bills.
Some warned that the move in consumer energy prices could add to the headline CPI figure. Fixed electricity and gas tariff items in the CPI are measured as twelve‑month averages, which blunts immediate pass‑through, but a large heating‑oil spike can still have a measurable impact.
Analysts also flagged airfares as a major contributor to the March rise. The timing of Easter travel amplified monthly increases in airfares, which feed quickly into services inflation.
Some forecasters expected airfares to surge sharply on the month, pushing up the transport and services components of CPI.
Services and the wider basket
Services inflation remains a particular concern for policymakers because services prices feed directly into wages and longer‑term inflation expectations, making the Bank of England's path for interest rates more uncertain.
Core CPI, which strips out food and energy, has shown more modest movement but remains above pre‑pandemic norms. That means inflation is being driven both by volatile commodity markets and by more persistent price‑setting in services, such as hospitality and travel.
Retailers face a squeeze from higher fuel and transport costs while households rein in spending. This can affect how much firms pass input cost rises to customers. Key pressures include:
- Higher transport and distribution costs for goods
- Smaller household budgets limiting price pass‑through
- Potential margin compression for retailers
How the conflict affected energy markets
Analysts tracking commodity markets recorded large moves in March. UK natural gas and oil prices rose sharply at points during the month after hostilities disrupted shipping through the region, pushing insurance and freight premiums higher and translating into steeper costs for petrol and diesel.
What made the March reading particularly sensitive was timing. Much of the oil and gas repricing happened in the weeks that feed directly into the monthly CPI sample, so a substantial portion of the shock could be captured immediately in headline figures.
Implications for the Bank of England
The inflation uptick presents a dilemma for the Bank of England. On the one hand, the surge has clear links to an external energy shock. On the other, persistent services inflation argues for a policy response if it proves durable.
Dharshini David, deputy economics editor, noted that past commodity shocks in 2022 produced far larger, more sustained inflation spikes. She said further rises in inflation are likely to be more modest than in 2022 because recent commodity moves have been smaller and consumers are more cautious.
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That mix — a short-term energy shock alongside persistent services inflation — matters because it leaves the Bank of England facing a clear policy dilemma between transitory external shocks and more durable domestic price pressures. It must weigh the 3.3% print against persistent services inflation when judging the path for interest rates.
This article was created with AI assistance.
