UK households are still in a mode of struggling and the fact that inflation has increased is a surprise and disheartening.  The forecast was that inflation would slowly be dropping month to month and getting closer the Bank of England’s goal of 2.0 per cent.  The annual rate of inflation rose to 3.5 per cent in March which is a slight increase over the 3.4 per cent recorded in February.  There had been a steady month to month decrease since the high of 5. 2 per cent that was recorded last September.

The Office for National Statistics which released the latest inflation data blamed the increase mostly on the increased cost of food.  This is of course an area where households cannot exactly cut costs since everyone is reliant on food no matter how the prices increase.  In particular there was more of an increase on fruit, breads, cereals and meat.

The increase in inflation will likely end the expectation of any further quantitative easing being considered in the next Bank of England’s Monetary Policy Committee (MPC) meeting in May. 

UK households truly needed a break in the inflation level as they are paying more for food and fuel and recently there was much news discussing the increased cost of borrowing.  Many lenders are raising their standard variable rates.  There are also tighter lending rules being adopted by lenders.  This is making it harder for homeowners looking to remortgage and harder for buyers to secure a new property.  UK households are dealing with budgets that are becoming much more squeezed rather than budgets easing due to economic recovery.