UK inflation in surprise fall to 4% in March

| April 12, 2011 | 0 Comments

The Office for National Statistics (ONS) today announced Consumer Price Inflation (CPI) fell to an annual rate of 4% in March, from February’s 28-month high of 4.4%.

The fall was attributed to food prices, which fell 1.4%.

While it was the first time in eight months inflation had slowed, it still remains double the target of 2% and has been above this level since December 2009.

Analysts had expected the rate to remain unchanged.

On a monthly basis, meanwhile, prices rose by 0.4% in March - the lowest annual rate of increase since January.

According to the Governor of the Bank of England, Mervyn King, inflation will fall back to its target by 2012.

The CPI inflation rate is a benchmark for the Bank’s Monetary Policy Committee but last week the Bank again opted to keep interest rates at the record low of 0.5% suggesting that the economy is still too fragile to lift rates.

However, the latest figures will ease the pressure on the central bank to hike rates in the short-term.

Meanwhile, Retail Price Inflation (RPI), which includes mortgage costs and is used as the basis for many wage deals, also slowed to 5.3% in March from 5.5% in February.

In other news today, retail sales fell sharply last month – providing further evidence of a fragile economic recovery.

According to the British Retail Consortium (BRC)/KPMG retail sales monitor, total sales fell by 1.9% on an annual basis – the worst fall since the series started in 1995.

Also today, the Royal Institution of Chartered Surveyors (Rics) revealed the UK housing market remains weak.

The Institution’s March monthly survey revealed sales and prices were flat, while interest from prospective buyers was waning.

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