LONDON (Reuters) -- Britain was the only country in western Europe with double-digit inflation in March after it fell less than expected, official data showed on Wednesday, bolstering bets that the Bank of England will raise interest rates again in May.
Consumer price inflation (CPI) dropped to an annual rate of 10.1%, the Office for National Statistics (ONS) said, down from 10.4% in February but well above the 9.8% forecast by economists polled by Reuters and the 9.2% predicted by the BoE in February.
Inflation, which hit a 41-year high of 11.1% in October, continued to eat into the spending power of workers whose pay is rising by less.
Prices for food and non-alcoholic drinks were 19.1% higher in March than a year earlier - the biggest such increase since August 1977 - which the ONS said reflected higher costs for biscuits and cakes, and to a lesser extent chocolate and fruit. Milk and sugar cost around 40% more than a year ago.
Britain’s headline inflation rate is now the highest in western Europe and compares with an average of 6.9% in the euro zone and 5.0% in the United States. Austria recorded a higher inflation rate than Britain in February.
The reading underlined expectations that Britain will suffer high inflation for longer than its peers due to its reliance on natural gas for heating and electricity, and the structure of government subsidies that smoothed out price changes.
The Bank of England also worries that high inflation might lead to a lasting upward shift in wage demands and businesses’ pricing strategies, exacerbated by a post-pandemic reduction in its labor force and trade and labor market frictions caused by Brexit.
Core inflation - which strips out volatile energy and food prices - failed to fall as expected and instead