Inflation in Bermuda continues its upward surge and has hit three percent for the first time since 1995.

The Bermuda Consumer Price Index (CPI) for March reveals the cost of goods and services on the Island has continued to creep up.

Acting Shadow Finance Minister Allan Marshall said the figures were worrying and urged Government to be cautious about spending.

He said Government spending above the rate of inflation was helping overheat the economy and urged Government to prioritise only programmes that were absolutely necessary.

Mr. Marshall added that the United Bermuda Party had warned Government to be cautious about spending because the Island would be affected by inflationary pressures in the US, which is due to increase interest rates again next week.

Acting Finance Minister Arthur Hodgson agreed inflation was a cause for concern, but said a detailed response would need to come from Finance Minister Eugene Cox, who is off the Island.

The CPI for March shows inflation rose by 0.1 percent from February, but it has crept up consistently since March of last year when it was 1.9 percent.

The biggest sector movement, however, was downward.

The cost of fuel and power dipped by 1.4 percent, with electricity going down by 1.2 percent in response to a drop in the fuel adjustment clause. Food rose on average by 1.2 percent, rent was up 0.1 percent and footwear and clothing costs increased by 0.2 percent.

There were also price rises in tobacco and liquor of one percent, transport and vehicles (0.2 percent), education, recreation and reading (0.9 percent) and health and personal care (0.2 percent).

Inflation rate jumps Part of the tobacco and liquor increase is attributed to a four percent hike in the cost of cigarettes as a result of duty being upped in the Budget.

Mr. Marshall said yesterday: "I hate to say I told you so, but all of the things we have been saying all along are coming home to roost, so caution has to be the watchword.

"We have to be concerned about these incremental increases in inflation. The US Federal Open Market Committee meets next week and is expected to increase interest rates.

"With this backdrop in the last six months, it is a signal of what we've been trying to communicate to the PLP at its last budget.

"Their first budget had spending over three times the rate of inflation and the last one was slightly over inflation.

"We have to ask whether Government has been paying attention to the macro-economic development over the last year.

"We've been trying to warn them about high interest rates, but a lot of extra spending has continued to heat up our economy.

"When Government spending stimulates the economy it creates high consumption.

Looming higher interest rates creates looming higher borrowing rates and higher mortgage rates are looming.

"Government has raised the debt ceiling to $250 million and is carrying out a lot of expensive spending programmes which will require borrowing at higher interest rates and higher servicing costs for the debt for the Country.

"What we've been saying all along to Government is that we are not in isolation from the US. Higher interest rates there should cause caution here about spending and delaying capital projects.

"Inflation erodes pay cheques and puts pressure on wages, so we are talking about a continual reduction in Bermuda's competitiveness where prices are under pressure.

"Government has to be careful about spending, because extra spending will continue to stimulate the economy and more inflationary pressure.'' Mr. Hodgson said: "Inflation is a matter of concern.

"Over-spending leads to over-heating, that's a correct analysis taken in itself, but for a detailed analysis I would have to refer you to the substantive Minister.'' Swizzle Inn owner Jay Correia, the chairman of the Chamber of Commerce's restaurant and nightclub division, said: "It is worrisome.

"We are all aware of how expensive it is here and any trend bringing it up is not benefiting anyone.

"It is getting harder and harder to operate profitably, and I would repeat the call for Government to give us similar concessions to those offered to hotels in breaks on duty and capital refurbishment.'' CHART CONSUMER PRICE INDEX