UK inflation hits 17-month high in April

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The Office for National Statistics (ONS) has today announced Consumer Price Inflation (CPI) rose to 3.7% in April – the highest level in 17 months and far exceeding the 2% target.

Furthermore, the increase was much higher than analysts’ expectations.

The rise was boosted by food, fuel and clothing price gains. Annual food inflation reached 2.6% last month, as prices for meat, fruit and vegetables rose compared with falling costs this time last year.

Meanwhile, fuel costs have increased by more than 25% in the last year. Average petrol prices hit 120.2p a litre in April – the highest since records began in 1996.

Meanwhile, Retail Price Inflation (RPI), which includes mortgage costs and is used as the basis for many wage deals, also rose to 5.3% – its highest rate since 1991, said the ONS.

The Bank of Englanda��s Governor, Mervyn King, has already said he expects inflation to be higher in the short-term but has reiterated that CPI will fall to the 2% target before the end of the year.

However, the rise in inflation has prompted Mr King to write to new Chancellor, George Osborne, to explain why inflation is above the Bank’s 2% target.

“If the recovery continues as expected, that will gradually erode the slack in the economy, bringing inflation back to target,” the letter said.

Meanwhile, the CPI inflation rate is a benchmark for the Bank of Englanda��s interest-rate setting Committee.

However, Mr King has previously dismissed fears that soaring inflation would demand a significant rise in interest rates in the months ahead.

Howard Archer, chief economist at IHS Global Insight, believes inflation has hit its peak and should start to fall in the short-term a�?as temporary upward pressures start to unwind.”

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