View more on these topics

Inflation climbs again to 3.7%

The annual rate of UK inflation, the Consumer Prices Index, rose to 3.7% in April from 3.4% in March.

The government’s target for the CPI measure of inflation is 2%.

The Centre for Economics and Business Research notes that the annual rate of inflation is at its highest for 17 months, and was above expectations of a rise to 3.5%.

Mervyn King, governor of the Bank of England, will now have to write to the new chancellor George Osborne to explain why inflation is above target.

Figures from the Office for National Statistics show that annual inflation was driven by higher prices for clothing and footwear where prices rose by 2.2% between March and April but rose only 0.2% a year ago.

Meanwhile the Retail Prices Index measure of annual inflation, including mortgage payments, has risen to its highest level since July 1991.

For the year to April the RPI was 5.3%, up from 4.4% in March.

The ONS says that as well as higher clothing and footwear prices, the RPI was pushed upward by increased housing costs.

Mortgage interest payments rose by 0.6% this year but fell by 7.7% a year ago following the cut to Bank of England base rate from 1% to 0.5%.

RPIX inflation, which measures the same items as the RPI but without mortgage interest payments, was 5.4% in April up from 4.8% in March.

The CPI shows that the UK inflation rate in March at 3.4% was above the provisional figure for the European Union at 1.9%.

Darren Cook, spokesman for Moneyfacts.co.uk, says: “Rises in the rate of inflation continue to antagonise savers who are already struggling to achieve a competitive rate of return on their money.

“Basic rate tax payers need to earn 4.63% just to break even, while higher rate tax payers need to earn 6.17% – a level that is only available on a handful of products.”

He adds: “A spiralling inflation rate, which could be aggravated by the predicted rise in VAT can only point towards a Bank base rate increase sooner rather than later.”

Recommended

PAUL HUNT, MANAGING DIRECTOR, PHOEBUS SOFTWARE

Be prepared for job cut consequences

The cuts are coming. With the election over we can expect the public sector to take a beating. You only have to look at Greece for a taste of what we can look forward to. There, 25% of the workforce is employed in the public sector and the cuts the government will have to make […]

winner.gif

LAST WEEK’S WINNER

“Gordon Brown had an army of lookalikes to take on the nation’s bigots.” STUART HOUGHTONJP MORGAN

PMS launches two-year deals starting at 3.45%

PMS is launching two discounted rate deals through Hinckley & Rugby Building Society. The first is a two-year deal at 3.45% at up to 80% LTV and the second is a two-year deal at 3.95% at up to 85% LTV.

Newsletter

News and expert analysis straight to your inbox

Sign up