UK inflation soars to 2½-year high in April

| May 17, 2011 | 0 Comments
UK inflation soars to 2½-year high in April

The Office for National Statistics (ONS) today announced Consumer Price Inflation (CPI) surged to an annual rate of 4.5% in April – a level not seen since October 2008 and higher than forecasts of a rise to 4.2%.

The surprise surge in inflation comes after the rate dropped to 4% in March and was attributed to soaring travel costs around the Easter period.

The latest figure means inflation is now more than double the target of 2% and has been above this level since December 2009 and is expected to remain above target during 2012.

Last week, the Bank of England warned that inflation could reach 5% later this year, driven higher by rising energy costs.

Energy costs are rising due to the surge in crude oil on the back of the ongoing political unrest in North Africa and the Middle East.

Meanwhile, today’s figure means the Bank of England’s Monetary Policy Committee (MPC) continues to be presented with a dilemma.

Despite pressure to lift interest rates to combat stubbornly high inflation, the central bank has been reluctant at this stage to lift rates when the recovery appears to be sluggish.

The CPI inflation rate is a benchmark for the MPC but earlier this month, the Bank again opted to keep interest rates at the record low of 0.5%.

Meanwhile, Retail Price Inflation (RPI), which includes mortgage costs and is used as the basis for many wage deals, eased to 5.2% in April, from March’s 5.3% - this was in line with expectations.

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