- Headline CPI in-line, core eases, services inflation firms
- Fuel, airfares drive gains; clothing provides limited offset
- Factory gate prices surge, led by sharp jump in crude inputs
- BoE seen cautious as risks tilt higher towards summer peak

By Harry Daniels
LiveSquawk News
@HarryDaniels71

22 April 2026 | 11:30 GMT

LONDON – UK investors received their first snapshot of inflation since the onset of the Middle East conflict, and while the data were far from encouraging, they largely met expectations.

The Office for National Statistics reported that headline CPI rose 3.3% y/y in March, in line with forecasts and three-tenths higher than February. On the month, prices increased 0.7%, a tenth above expectations, following a 0.4% gain previously.

Encouragingly, core CPI – which excludes energy, food, alcohol. and tobacco – eased a tenth to 3.1% y/y, undershooting the 3.2% consensus. The CPI goods annual rate rose to 2.1% from 1.6%, while services inflation accelerated by two-tenths to 4.5%.

ONS chief economist Grant Fitzner said March’s increase was largely driven by higher fuel prices, which recorded their largest rise in more than three years. Airfares and food prices also contributed to the upside, he explained. “The only significant offset came from clothing costs, where prices rose by less than this time last year.”

JP Morgan economist Allan Monks noted that, excluding energy and commodities, the bank’s estimate of the BoE’s underlying “supercore” services measure – which strips out transport – rose 0.36% m/m on a seasonally adjusted basis. “This is becoming an underappreciated and noteworthy development, marking a fifth consecutive firm print of this magnitude,” he said.

There were concerning signals for the inflation outlook from factory gate prices. In the 12 months to March, PPI input prices surged 5.4%, up sharply from a revised 0.7% rise in February and around two percentage points above expectations. On the month, input prices increased 4.4% from an upwardly revised 0.9%, versus forecasts for a 3.0% gain.

The ONS said the largest contribution to the annual increase came from crude oil inputs, reflecting a sharp 58.8% monthly rise between February and March.

Output prices also remained elevated. PPI output rose 2.6% y/y in March, above the 2.4% expected and unchanged from February. On the month, prices increased 0.9%, rebounding from a 0.5% decline previously.

ING economist James Smith warned that rising fuel costs, alongside a scheduled increase in household energy bills in July, could push headline inflation towards 3.5-4.0%. “On ING’s base case for oil and natural gas prices – with crude holding between USD 90–100/bbl through Q2 and Q3, and gas averaging EUR 55/MWh this quarter – we expect UK inflation to peak slightly above 4% in August or September.”

Despite the expected acceleration, economists anticipate that the Bank of England will remain cautious. JPMorgan’s Monks said the March release was broadly in-line with the BoE’s post-conflict projections outlined in its latest minutes, but the analyst warned that persistent strength in services inflation presents a challenge, complicating the central bank’s ability to dismiss another year of inflation above 3% as a temporary, energy-driven shock.

Nonetheless, ING’s Smith argued that “so long as inflation does not rise materially above 4% – a threshold the bank has highlighted as more likely to trigger persistent price pressures – policymakers are likely to keep rates on hold this year.”