UK inflation hit a new high of 7 per cent in March, as the cost of living crisis continues.
The consumer prices index rose by 7 per cent in the 12 months to March 2022, up from 6.2 per cent in February, which exceeded the expectations of Reuters' economists, who had predicted a 6.7 per cent rise.
The rate was impacted by rising prices of fuel, second hand cars, clothing and footwear and furniture, according to the Office for National Statistics
This does not include the hike in energy prices seen earlier this month with the raise of the energy price cap.
Inflation has now surged ahead of the Bank of England’s 2 per cent target each month since May last year.
In March the central bank increased interest rates to 0.75 per cent in an attempt to curb rising prices.
Adrian Lowery, personal finance expert at investing platform Bestinvest, said if inflation continues to overshoot expectation, the pressure will only grow on the Bank of England to give more consideration to the medium-term path of inflation, over the possible drags on the real economy caused by higher rates.
The danger is that as inflation expectations rise, so do wage demands and bargaining power, he said, and that could entrench what is hoped to be a short-to-medium term spike in inflation into a medium-to-long term problem.
“While the monetary policy committee has the flexibility to bring inflation gradually back down to target in a year or two’s time – the central projection for 2 per cent forecast to be met the end of 2023 in the monetary policy committee's February report - it’s questionable how such projections can be viewed with any confidence given the febrile economic conditions.”
Becky O’Connor, head of pensions and savings at Interactive Investor, said over the next few months, evidence of people failing to cope with price rises is likely to emerge.
“This kind of inflation leaves people living on a wing and a prayer.
“Any efforts people can make to preserve their savings and keep contributing towards their long term goals will be worth it in the long run.”
Danni Hewson, AJ Bell financial analyst, said there was "no way to sugar coat what’s happening to prices".
She said: "Pretty much everything is significantly more expensive than it was a year ago and there is every indication the situation is just going to get worse.
“I don’t think anyone will be surprised to learn that the price at the pump played a huge part in the March story, petrol prices were up by more than 12p a litre in a single month, diesel by more than 18p. Motorists winced every time they had to fill up their vehicles and the chancellor’s duty cut has done little to soothe. Russia’s invasion of Ukraine has clearly played a part as real sanctions or those self-imposed, disrupted supply of oil and sent the price of a barrel of the black stuff soaring."