Fuel and food prices keep inflation up

The consumer price index (CPI) rate of inflation is forecast to hold at 3.4 per cent in March – its lowest rate since November 2010 but still far below the Bank of England’s two per cent target. Inflation has fallen from 5.6 per cent last September due to the waning impact of the VAT rise at the start of 2011, falling energy, food and commodity prices and a number of bill cuts from utility providers in February.

However, oil prices rose in March amid fears over increasing tensions between the West and Iran, pushing up petrol pump prices as well as having an impact on food bills.

Petrol went above 140p a litre or the first time in March, while diesel hit a new record of 146.72p, according to the AA.

Victoria Cadman, economist at Investec, said no change in the rate of inflation would be an “uncomfortable reality” for the Bank of England, which had forecast inflation to fall.