UK inflation to rise further in March - Barclays Bank

Investing.com - UK inflation continued to climb in February, with Barclays Bank forecasting that the consumer price index (CPI) will maintain its upward trend in March before potentially easing slightly by mid-year.

The UK consumer price index rose by 3.2% in the 12 months to February 2025, up from 3.0% in January 2025.

Inflation will continue to rise in March, with the CPI likely to hit 3.35% year-on-year, according to Barclays economists. Factors such as rising energy prices, food input costs and tax-related adjustments will continue to put upward pressure on prices.

“In the current scenario, the main drivers of the CPI are food and energy. Fuel prices, especially gasoline and diesel, rose sharply in February and we expect this to continue in March,” analysts at Barclays said in a March 25 report.

Cost pressures in the manufacturing sector have also increased, which Barclays said will put further pressure on food prices in the coming period. Data from the United Nations Food and Agriculture Organization (FAO) has shown that global food prices are rising, making it difficult for domestic producers to maintain lower prices.

In addition, prices in sectors such as tobacco and alcohol will also contribute to rising inflationary pressures in March, Barclays said.

Another factor is that energy prices, especially gasoline, are expected to continue rising. According to Barclays, fuel pump price trackers showed a significant increase in fuel costs in March, contributing to the CPI increase.

However, Barclays predicts that after peaking in Q1/2025, inflation will trend down gradually as transitory factors such as energy prices and food costs ease. CPI could fall to near 2.8% in June and fall further in the following months.

"Our forecast suggests that inflation could peak at around 3.5% in Q2 before starting to decline gradually as negative base effects emerge. However, upside risks remain in 2026, especially if external factors such as raw material prices and import costs continue to rise," Barclays added.