UK inflation rises above expectations

The Bank of England's target measure, CPI inflation, increased to 3.4 per cent, up from 3 per cent in February mainly due to surging fuel prices as the price of oil moved above $80 a barrel. This means it is now the fourth month that CPI inflation has remained above the Bank's 2% target. Core inflation, which takes out the impact of food and energy costs, also moved up from 2.9% to 3% and RPI (Retail Prices Index) inflation, which includes housing costs, also rose to 4.4 per cent in March from 3.7 per cent. The average cost of a litre of petrol is now 120.9p compared to 95.2p in the same period in 2009, according to the AA.

This may mean that the BOE may move to tighten interest rates from the rock bottom 0.5% level sooner than expected if the GDP numbers due Friday are also robust