Bank of England is estimating that inflation will reach 1.9% by the end of the year
CPI was raised by an increase in fuel costs and clothing even though the price of food went down.
The ONS also confirmed that the prices set by manufacturers jumped by 1.9% for the year up to March, the highest in just under two years.
The prices they paid for inputs rose sharply by 5.9%, the most since September 2018.
The Bank of England is estimating that inflation will reach 1.9% by the end of the year while experts are saying it could exceed that figure before then.
Yael Selfin, chief economist at KPMG, said: “The increase in Ofgem’s energy price cap in April, alongside rising oil prices and the reversal of the VAT rate for hospitality and tourism, will push inflation above the two per cent target later this year.”
While others have said the spike in inflation is nothing to worry about, including Laith Khalaf, financial analyst at AJ Bell:
“The spike in inflation is nothing to worry about – yet. We always knew inflation was going to rise once we started lapping the beginning of the pandemic, in particular the steep falls in energy prices witnessed in the spring of last year,” Khalaf said.
“Petrol prices were 4.3p higher in March than a year ago, when they stood at 119.4p. In May 2020, they dropped to 106.2p, so this upward pressure on inflation will continue to grow in the coming months, even if fuel prices are relatively stable now.”
Khalaf added that there are a number of factors to monitor that could influence spiralling inflation.
“The big question is whether the economic recovery, combined with fiscal and monetary stimulus, will start to foster a more sustained, inflationary trend that has the potential to get out of hand,” Khalaf said.
“This risk isn’t likely to come home to roost anytime soon, with unemployment expected to rise later this year, thereby acting as a drag on rising wages. But beyond that, the worry is that the powder keg of cheap money could ignite an inflationary spiral.”