UK inflation climbs to 3.3%, driven by largest increase in fuel prices in over three years – business live

UK CPI accelerated to 3.3% in March from 3.0% in February, driven by a sharp jump in fuel prices linked to the Iran war, with petrol averaging 140.2p/litre and diesel 158.7p/litre, both the highest in months. The inflation backdrop is becoming less benign for the BoE: NIESR’s Peter Dixon said the MPC faces a dilemma between looking through what may be temporary energy-driven inflation or tightening to guard against second-round wage effects, and he expects one precautionary 25bp rate hike over the coming months. Food inflation also re-accelerated to 3.7% y/y, with the FDF warning costs could pass through over 7-12 months and eventually push food inflation toward 9%-10% by year-end absent intervention. That keeps UK real-rate expectations and policy uncertainty elevated, a modestly supportive macro setup for gold on dips if inflation stays sticky and the BoE is forced into a more hawkish stance. Near term, the key market watchpoint is whether April base effects pull CPI lower first, before energy and food supply shocks reassert upward pressure later in 2026. For precious metals, the main implication is less about immediate inflation relief and more about persistent policy uncertainty and stagflation risk, which tends to underpin bullion demand if growth deteriorates alongside sticky prices.