Sticky March Inflation & Strong Wage Data Adds to Likelihood of Hike

UK MAR CPI +0.8% M/M (FCST +0.5%); FEB +1.1% M/M

UK MAR CPI +10.1% Y/Y (FCST +9.8%); FEB +10.4% Y/Y

UK MAR CORE CPI +6.2% Y/Y (FCST +6.0%); FEB +6.2% Y/Y

• The BOE was given further evidence of the sticky prices across the UK economy, with inflation again above its own expectations in March. CPI came in 0.3pp higher than consensus expectations, slowing only 0.3pp to +10.1% y/y. This is back in line with the January inflation rate and 1.0pp below the October peak (the highest since 1981).
• Prices rose +0.8% m/m, also outpacing expectations of a +0.5% m/m uptick. Motor fuels, housing, household services (particularly liquid fuels) were the key downwards drivers of inflation on the month, whilst price pressures from food, recreation and culture intensified.
• In aggregate, goods inflation was +0.8% m/m and +12.8% y/y in March, slowing from +13.4% y/y in February. Services inflation saw a +0.7% m/m and held steady at +6.6% y/y. Food inflation alone reached a 45-year high in March at +19.1% y/y (up 1.1pp), whilst recreational and culture rose 0.6pp to +4.6% y/y.
• As such, core CPI also was on par with February at +6.2% y/y, disappointing consensus expectations of a 0.2pp deceleration.
• Last week, BOE chief economist Huw Pill told an MNI Connect livestreamed event that inflation is expected to decline more quickly in Q2 2023. (MNI BRIEF: UK Inflation Still Seen Lower In Q2 - BOE Pill)
• This sticky inflation data follows the upside surprise in wages in yesterday's labour report, making a 25bp hike at the May 11 meeting more likely.

Source: ONS