UK inflation climbs to 3.3%, driven by largest increase in fuel prices in over three years – business live
Oil prices fall on ceasefire extension but stay near $100 a barrel as strait of Hormuz remains closedPeter Dixon, senior economist at the National Institute of Economic and Social Research, a respected think tank, said:While inflation may fall back in April due to base year effects, it will climb further
Julia Kollewe
April 22, 2026
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Peter Dixon, senior economist at the National Institute of Economic and Social Research, a respected think tank, said:
While inflation may fall back in April due to base year effects, it will climb further in the course of 2026, remaining well above the Bank of England’s target.
The monetary policy committee’s dilemma in the coming months is whether it should look through what may only be a temporary rise in inflation, or whether it will need to tighten policy to tackle second round effects [on wages].
On the one hand, rising energy prices will add to inflation over the rest of the year. However, the labour market is broadly in balance, so second round inflation effects are likely to be relatively muted.
Nevertheless, the MPC cannot risk appearing complacent, and we therefore expect one precautionary 25 basis point rate increase over the coming months.
Food inflation has also picked up again, to an annual rate of 3.7% last month, up from 3.3% in February.
Chocolate and confectionery, meat, fish, and soft drinks became dearer, while bread and cereals, and dairy products pulled the inflation rate lower.
The Food and Drink Federation has crunched the numbers.
Prices rose the fastest for beef and veal (18.8%), whole milk (12.7%) and confectionary products (11.1%).
Prices fell for nine categories, with the largest drops for: flours (-6.8%), olive oil (-6.2%), and pizza (-2.6%).
It will take 7-12 months for cost pressures on manufacturers to feed through to consumers
Liliana Danila, chief economist at the FDF, said:
The clouds are gathering, but the storm has not yet broken on rising food and drink inflation. The war in Iran has delivered a cost shock that is already too large for manufacturers to absorb in full. The impact on prices will take time to work its way through the system, but it’s only a matter of time before it does. For manufacturers, long-term contracts with suppliers and retailers mean it can take up to a year for higher costs to be fully passed through. But where products are less processed, or supply chains are shorter, prices will move more quickly. As a result, absent of any government intervention, we expect a gradual but persistent pickup in food inflation, reaching around 9%–10% by the end of the year.
This means we’re in a crucial window for action to limit the impact on shoppers. We’re working with government to look at the levers they can pull now to support food manufacturers now to soften the blow on consumers later in the year.
In better news for consumers, clothing prices fell by 0.8% in the 12 months to March, compared with a rise of 0.9% in the 12 months to February, marking the lowest recorded since March 2021, when prices were affected by the Covid-19 pandemic.
The average price of petrol rose by 8.6p a litre between February and March, compared with a fall of 1.6p a litre a year earlier. The average price was 140.2p a litre, the highest since August 2024, the ONS said.
Diesel prices rose even more, by 17.6p a litre, compared with a drop of 1.6p a litre this time last year. The average price stood at 158.7p a litre, the highest since November 2023.
Air fares also increased, by 10% between February and March, compared with a fall of 0.3% a year ago. It was the largest monthly increase between February and March since 2016, when it was 22.9%. The upward effect came almost entirely from long haul routes, where the return flights were on the Tuesday immediately after the Easter weekend.
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
It’s UK inflation day!
Inflation in the UK accelerated to 3.3% in March driven by higher fuel prices because of the Iran war.
The annual inflation rate rose from 3% in February, according to the Office for National Statistics.
On a monthly basis, consumer prices rose 0.6% in March, compared with a rise of 0.3% in March 2025. Motor fuels were the biggest factor behind the increase, while clothing made a downward contribution to inflation.
Transport inflation, including motor fuels and airfares which also rose, almost doubled to 4.7% in March, from 2.4% in February, the highest recorded since December 2022.
Asian stock markets mostly rose as did US stock futures, and oil prices fell after Donald Trump said he would extend the two-week ceasefire with Iran, amid frantic efforts to bring the two sides back to the negotiating table.
Japan’s Nikkei and China’s CSI 300 both rose 0.4% while Hong Kong’s Hang Seng fell 1.4%.
The US military maintained its blockade of Iranian ports, and Iran has said the US must end it in order for negotiations to resume.
Brent crude has fallen 1.1% to $97.37 a barrel, but remains near $100 a barrel, with the strait of Hormuz still closed.
Julia Kollewe
