British Inflation Surpasses Expectations Amid War-Driven Energy Price Shock

Inflation in Great Britain accelerated to 3.3% year-on-year in March from 3.0% in February, matching expectations, while monthly inflation rose 0.7%, above the previous month’s 0.4% increase and ahead of forecasts for a 0.6% gain.

Core inflation, which excludes volatile food, energy, alcohol, and tobacco components, eased slightly to 3.1% in March from 3.2% previously, but remains well above the central bank’s target and continues to signal persistent underlying price pressures.

The sharpest increase was recorded in factory input prices, with PPI input inflation surging 5.4% in March after a 0.7% rise previously. Meanwhile, producer output prices, which measure prices charged by manufacturers, increased 2.6% last month after rising 1.8% in February.

Services inflation, closely watched by the Bank of England as an indicator of longer-term price pressures, also climbed to 4.5% in March from 4.3% in February.

The strong pickup in inflation was driven largely by higher fuel prices, signaling that the full negative impact of the war between the United States, Israel, and Iran — which disrupted one of the world’s key oil supply routes — is likely to become more visible in the coming months.

Rising prices have also revived concerns that the country may be heading back toward a period of persistently elevated inflation, increasing pressure on the Bank of England. However, economists still believe the latest figures are unlikely to be enough to place a rate hike on the agenda at next week’s Monetary Policy Committee meeting.

British inflation had already been the highest among G7 economies before the Middle East conflict began, and with the latest energy shock, it is expected to rise to 3.5% by mid-2026 and peak near 4%, according to International Monetary Fund forecasts.