Inflation hits 4.5% in April
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The UK Consumer Prices Index annual rate of inflation hit 4.5% in April, up from 4% in March, show the latest figures from the Office of National Statistics.
The ONS says the timing of Easter 2011 had a significant impact on inflation.
Air transport, alcohol and tobacco and gas were the most significant drivers behind the increase in annual inflation between March and April.
The main downward pressures to annual inflation came from petrol and diesel, miscellaneous goods and services, clothing and footwear and communication.
However, the Retail Prices Index measure of inflation - which includes mortgage interest payments - fell to 5.2%in April from 5.3% in March.
CPI fell unexpectedly in March to 4%, down from 4.4% in February.
Scott Corfe, economist at Cebr, says the Bank of England will undoubtedly face renewed criticism for being too complacent over the issue of inflation, with ongoing concerns about the Bank losing credibility over its commitment to a 2.0% central target for CPI annual growth.
He says: “May’s Inflation Report from the Bank warned that CPI inflation could rise to as high as 5.0% later this year on the back of rising utilities prices.
“On the other hand, the Bank insists that there is a compelling case for inflation falling back towards target from 2012.
“The VAT rises of the past two years have pushed up price growth in 2010 and 2011, while the global commodity price rally in the second half of 2010 has also led to higher goods prices in the UK. By 2012, the effect of VAT on prices will have dropped out of the annual rate of inflation, and there are now early signs of some stabilisation in global commodity markets.”
He believes this points to a sharp drop in inflation come early 2012, providing a rationale for the Bank to hold its nerve and keep interest rates on hold until the UK economic recovery becomes more robust and certain.
He adds: “With Andrew Sentance – the chief proponent of a rate rise – no longer on the Monetary Policy Committee, we think there is unlikely to be any movement in the base rate until November at the earliest.”
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