Inflation in the month to March is expected to remain well above the Bank of England’s target rate of two per cent, putting policymakers in an awkward position ahead of a potential interest rate cut in May.

A Bloomberg poll of economists said that consumer price inflation (CPI) on a year-on-year basis will hit 2.7 per cent, which is one decimal point lower than the figure seen in the month before.

Soaring alcohol prices and expensive apps drove the high rate of inflation in February. 

The UK is still on its comedown from a peak inflation rate of 11 per cent in late 2022. 

Inflation has proved stickier than initially expected after food prices continued to rise at a fast pace. Energy prices in the UK are also much higher than those seen across the Channel in France. 

The Bank of England’s last forecast in March estimated that inflation would hit a peak of 3.75 per cent this year while the UK’s fiscal watchdog believed inflation would hit 3.2 per cent. 

But those forecasts are likely of no interest to policymakers and economists since President Donald Trump introduced sweeping tariffs on all vehicle and steel imports, plus aggressive tariffs on goods from China and Canada.  

A “baseline” tariff of ten per cent on UK goods will also come into effect in three months unless a trade deal can be agreed. 

Uncertain future

Most economists have said that President Trump’s sweeping tariffs from China will have a deflationary effect on prices in the UK due to weaker demand and cheap products flooding into Britain. 

The Bank’s Clare Lombardelli and Sarah Breeden took a cautious approach when they were asked about the effect tariffs would have on prices as both flailed  the impacts remained unclear.