26 March 2025
If you are covering the latest UK inflation statistics, please find below a comment from Lindsay James, investment strategist at Quilter:
“With Rachel Reeves up at the despatch box later today to reassure not only investors, but the nation that the economy is doing just fine, today’s inflation figures are a reminder of what lurks ahead. Inflation came in at 2.8%, with core inflation remaining very sticky at 3.5%, both marginally better than expected. While this is only moderately above target, the news looks fairly bleak as we move through the year, leaving the government with plenty of work to do.
“Energy prices are due to climb as the price cap rises in the coming months. Coupled with this the uncertain economic policy coming from across the Atlantic and the outlook for inflation looks decidedly negative. Furthermore, UK wage growth continues to be surprisingly strong, while imminent hikes to national insurance contributions from employers is likely to lead to higher prices. We are also seeing consumers struggling, with spending being held back. Interestingly, February usually sees clothing prices rise as spring product ranges hit the shops, but these statistics show the first fall between January and February since 2021 when the pandemic hit sales patterns.
“There is a cocktail of risks right now for the UK when it comes to inflation, and this is only adding to the ‘stagflationary’ fears. Economic growth is miniscule and risks going backwards, but should inflation continue to refuse to get back near the 2% target, it is difficult to see what the Bank of England can do with interest rates. Not cutting or not doing it quick enough may be enough to tip the economy back into recession, but cutting too soon or to quickly and you risk adding fuel to the inflationary fire.
“The Chancellor is unlikely to announce much today that will help quell the fears around the UK economy. The UK is not immune from Donald Trump’s trade wars, and as such it is likely things will continue to look bleak for the UK economy until the government can reverse sentiment and see some of its policies having the desired effect.”
