Interest rate cut expectations thwarted? Ceasefire not yet stable, inflation in the UK service sector a major concern.
2026-04-21 12:40:53
As the first impacts of the war with Iran will be reflected in the latest data, the UK's March CPI is expected to jump to 3.3%.
The UK Office for National Statistics (ONS) is expected to report a slight increase in the annual inflation rate for March, mainly due to soaring fuel prices and volatility in financial markets.
Economists surveyed by Bloomberg predict that the CPI will reach 3.3%, higher than February's 3%.
Accelerated price growth could dampen market hopes for improved stability, posing challenges for the UK government and the Bank of England in the coming months.
Economists in the City of London pointed out that the main factors driving inflation in March included a sharp rise in airfares and a dramatic surge in the price of heating oil used by rural households, and that heating oil prices are closely linked to changes in financial markets.
Throughout March, UK natural gas prices surged by as much as 50%, while Brent crude oil prices broke through $100 per barrel. Currently, with the prospects for a US-Iran ceasefire agreement uncertain, oil prices are hovering around $95 per barrel.
Goldman Sachs analyst James Moberly said that rising consumer energy prices that month could contribute up to an additional 0.4 percentage points to the inflation rate , with gasoline prices expected to rise by about 6.5% in March. Diesel prices are estimated to rise by more than 12%, and household energy bills are also likely to increase accordingly.
He said, “First, households that have signed new fixed-price electricity and gas contracts will experience price increases; however, the fixed-price electricity and gas tariff items in the CPI are calculated on a twelve-month average, which greatly reduces their immediate impact on the CPI. Second, heating oil prices nearly doubled at the beginning of the conflict, which will be reflected in the liquid fuel portion of household energy bills. Although this portion accounts for a small share of the CPI basket, the large increase in heating oil prices is expected to contribute 8 basis points to the overall monthly inflation rate.”
Barclays' chief UK economist, Jack Meaning, said that the "more than expected" rise in airfares will further push up price growth.
The bank estimates that airfares could rise by as much as 14% that month, "well above the seasonal average for March, partly due to the timing of return flights during the Easter travel season."
Mortgage interest payments are expected to rise 0.2% this month, while rents are expected to increase by 0.4%, bringing the annual rent increase to 3.6%.
Services inflation (a key indicator closely watched by Bank of England rate-setters) is expected to be higher than previously forecast, reaching 4.4%.
The day before the release of new inflation data, the UK Office for National Statistics will publish labor market data, which may provide the Monetary Policy Committee with some background information to help determine whether wage growth will further push up prices in the coming year.
The UK Office for National Statistics (ONS) is expected to report a slight increase in the annual inflation rate for March, mainly due to soaring fuel prices and volatility in financial markets.
Economists surveyed by Bloomberg predict that the CPI will reach 3.3%, higher than February's 3%.
Accelerated price growth could dampen market hopes for improved stability, posing challenges for the UK government and the Bank of England in the coming months.
Economists in the City of London pointed out that the main factors driving inflation in March included a sharp rise in airfares and a dramatic surge in the price of heating oil used by rural households, and that heating oil prices are closely linked to changes in financial markets.
Throughout March, UK natural gas prices surged by as much as 50%, while Brent crude oil prices broke through $100 per barrel. Currently, with the prospects for a US-Iran ceasefire agreement uncertain, oil prices are hovering around $95 per barrel.
Goldman Sachs analyst James Moberly said that rising consumer energy prices that month could contribute up to an additional 0.4 percentage points to the inflation rate , with gasoline prices expected to rise by about 6.5% in March. Diesel prices are estimated to rise by more than 12%, and household energy bills are also likely to increase accordingly.
He said, “First, households that have signed new fixed-price electricity and gas contracts will experience price increases; however, the fixed-price electricity and gas tariff items in the CPI are calculated on a twelve-month average, which greatly reduces their immediate impact on the CPI. Second, heating oil prices nearly doubled at the beginning of the conflict, which will be reflected in the liquid fuel portion of household energy bills. Although this portion accounts for a small share of the CPI basket, the large increase in heating oil prices is expected to contribute 8 basis points to the overall monthly inflation rate.”
Barclays' chief UK economist, Jack Meaning, said that the "more than expected" rise in airfares will further push up price growth.
The bank estimates that airfares could rise by as much as 14% that month, "well above the seasonal average for March, partly due to the timing of return flights during the Easter travel season."
Mortgage interest payments are expected to rise 0.2% this month, while rents are expected to increase by 0.4%, bringing the annual rent increase to 3.6%.
Services inflation (a key indicator closely watched by Bank of England rate-setters) is expected to be higher than previously forecast, reaching 4.4%.
The day before the release of new inflation data, the UK Office for National Statistics will publish labor market data, which may provide the Monetary Policy Committee with some background information to help determine whether wage growth will further push up prices in the coming year.
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