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Surprise Rise in Inflation

The news that inflation has risen in March has come quite unexpectedly to the economic world, and is being blamed to a large degree on a lack of supermarket discounts.

The Consumer Prices Index shows a rise from 3.4% in February to 3.5% in March.

However the Retail Prices index shows a drop from 3.7% to 3.6% for the last month. The difference between the two indexes is due to the different ways used to calculate the inflation rate, and the criteria accounted for respectively in the two surveys.

The surprise CPI statistic is being blamed on higher prices for food and clothing, amongst other factors. Bread, fruit and vegetables, DVDs and shoes have all contributed to the small rise in inflation, but gas and electricity prices lowered slightly in the last month.

In 2003 the Bank of England announced plans to target a 2% rate of inflation, and there has been a steady decrease in inflation rates in recent times.

Therefore this blip in the lowering trend is thought to only be temporary. The rise had been expected by city analysts.

Inflation is an important part of economy as it is often used in relation to wage deals.

The rise has come at a difficult time for the Bank of England as it prepares for May’s Monetary Policy Committee meeting.

Chris Williamson of Financial Information service Markit told the Daily Telegraph ‘The combination of stubbornly high inflation and low wage growth may well continue to squeeze consumer spending in coming months, limiting any likely boost to spending arising from events such as the Olympics and Diamond Jubilee and acting as a drag on the recovery.’

By Sean Dudley


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