"As inflation holds below the below the Bank of England’s 2% target, consumers may feel a little more at ease with their cash stretching that bit further"
CPI inflation remained unchanged in March at 1.9%, according to the latest ONS data.
CPIH inflation, which the ONS now uses as its headline measure and includes owner occupiers’ housing costs, has remained static at 1.8% for the past three months.
Rising fuel and clothing prices produced the largest upward contributions, but these were offset by a fall in costs across a range of recreational and cultural goods, food and vehicles.
Rupert Thompson, head of research at Kingswood, commented: “UK inflation in March came in lower than expected. The core and headline measures were both unchanged at 1.8% and 1.9% respectively rather than edging higher as had been expected.
"The latest numbers leave inflation running just below the Bank of England’s 2% target and should dampen somewhat the enthusiasm to raise rates - if and when Brexit uncertainty subsides - to head off the ongoing pick up in wage growth. The Bank of England faces a similar conundrum to the Fed in the US – how much emphasis to put on the tightness of the labour market, which is putting wages under upward pressure, when as yet there is precious little sign of it feeding through to higher inflation.”
Tom Stevenson, investment director for personal investing at Fidelity International, added: “The Bank of England will view today’s inflation data as the least problematic of the week’s three economic announcements. Prices are rising pretty much in line with the Old Lady’s 2% target, giving the central bank cover to continue sitting on its hands. As such the CPI data sits between yesterday’s employment data (which pointed towards higher interest rates in due course) and tomorrow’s retail sales numbers (which probably won’t).
“The Bank is stuck on the horns of a Brexit dilemma. The strong jobs market illustrates the danger of leaving interest rates at today’s historically low level but the rest of the economy is clearly struggling with the ongoing uncertainty which only deepened with the latest Article 50 extension. Until there is more political clarity, the Bank will remain unable to begin its desired normalisation of monetary policy.
“With interest rates unlikely to rise much for the foreseeable future, savers and investors will need to continue seeking decent returns in the stock market. Fortunately, the UK market offers an attractive alternative, with historically low valuations and an income yield well in excess of that on offer traditionally safer investments like bonds and cash.”