UK inflation, highest in Western Europe, falls only a little in March

LONDON (Reuters) -Britain now has Western Europe’s highest rate of consumer price inflation after it fell by less than expected in March to 10.1% in March from February’s 10.4%, official data showed on Wednesday.

Economists polled by Reuters had forecast that the annual CPI rate would drop to 9.8% in March, moving further away from October’s 41-year high of 11.1% but still eating into the spending power of workers whose pay is rising by less.

Despite falling in March, Britain’s inflation rate was the highest in Western Europe and the only country in the region to post a double-digit number for last month.

The Office for National Statistics said the price of food and non-alcoholic drinks rose by 19.1% in annual terms in March – the biggest such rise since August 1977.

Last month the Bank of England said it expected inflation to “fall significantly” in the second quarter. In February, the BoE had forecast March inflation of 9.2%.

While inflation is likely to drop naturally as the sharp increases in energy prices seen last year fall out of the annual comparison, the BoE is trying to judge how fast it will decline.

Recent indicators have looked mixed on that front, with data on Tuesday showing stronger-than-expected wage growth. Business surveys however show cooling cost and selling price pressure.

Financial markets on Tuesday pointed to a roughly 80% chance that the BoE will raise interest rates next month.

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