News | Wednesday, 19 May 2010

UK inflation higher than expected

Rising food costs and Budget duty hikes have caused Inflation to rise in Britain to a 17-month high in April. The Consumer Prices Index hit 3.7 per cent last month. That was well ahead of the 3.5 per cent expected by the City. The Bank of England Governor Mervyn King must now write a letter to the new Chancellor George Osborne to explain why Inflation remains above the Bank’s 2 per cent target.
He has said the level is likely to fall back to its target “within a year”.
The headline Retail Prices Index also jumped to 5.3 per cent - the highest since July 1991 - as mortgage interest payments edged higher last month, in contrast to a year earlier when lenders passed on rate cuts.
Although the Bank’s Monetary Policy Committee expects Inflation to ease back, the higher than expected figures could increase nerves among policymakers and shift them towards rate hikes to prevent the cost of living rising out of control.
Alcohol and cigarette duty hikes in March’s Budget added to inflationary pressure.

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