"Given that we are still seeing inflation at over 10% against these already inflated prices, the Monetary Policy Committee and the government are now likely to be very concerned."
CPI inflation rose by 10.1% in the 12 months to March 2023, down from 10.4% in February, the latest ONS figures show.
On a monthly basis, CPI rose by 0.8% in March, compared with a rise of 1.1% in March 2022.
CPIH inflation, which includes owner occupiers’ housing costs, rose by 8.9% in the 12 months to March, down from 9.2% in February.
The largest downward contributions to the monthly change in both the CPIH and CPI annual rates came from falling fuel costs, but were offset by rising food, electricity and gas prices.
Giles Coghlan, chief market analyst at HYCM, said: “After last month’s shock CPI reading, today’s print still shows double digit inflation. This is a sign that inflation is not yet back on track and the longed-for decline towards pre-Covid levels is not quite there. The question investors will be asking now is, where does the Bank of England go from here? The general consensus at the moment is that the central bank will need to hike by 25bps in the May meeting, especially with the strong wage growth seen earlier in the week.
"The issue for the Pound and for the BoE is whether the latest data merits continued tightening. The surge in average earnings will no doubt be sounding alarm bells that the dreaded wage-price spiral could become entrenched in the UK, which has moved the dial in favour of another 25bps hike when the monetary policy committee convenes next month. Some investors are fearing that the dreaded wage-price spiral could be about to bite and it will be hard for the BoE to not hike rates next month"
Ian Hepworth, director of Funding Solutions UK, commented: "This latest inflation data is a hugely worrying statistic. March 2022 was the first full month after the invasion of Ukraine and prices spiked. Given that we are still seeing inflation at over 10% against these already inflated prices, the Monetary Policy Committee and the government are now likely to be very concerned. Further rate rises will now almost certainly be on the cards, putting further pressure on businesses and households."
Simon Webb, managing director of capital markets and finance at LiveMore, added: “Inflation has been in double digit figures since last September and it is still stubbornly there but a fall, even if only by 0.3%, is better than nothing. Let’s hope this is the start of the downward trajectory towards the 2% target.
“But we are not out of the woods yet. Food inflation is still exceptionally high, as are energy prices although they have come down, but the energy market is very volatile so there is still price uncertainty. On the other hand, the fall in the cost of petrol bodes well for inflation if it continues to drop.
“Looking to what this will do with regards to the Bank of England base rate decision next month, the Bank has said it will be data driven and the next meeting is still a number of weeks away, but it is safe to say the days of higher interest rates will be around for quite a while yet.”