Rise in inflation rate predicted

Tuesday 20 May 2014

Inflation is expected to have risen for the first time in ten months when official figures for April are published today.

The Consumer Prices Index (CPI) measure of inflation is predicted to have rebounded to 1.8% after hitting a new four-year low of 1.6% the month before. It will still mean the rise in the cost of living has been at or below the Bank of England's 2% target for five months in succession - with the rate expected to remain low for some time.

But it could stall hopes for a sustained return to rising real-terms pay, with average earnings only growing at 1.7% according to the latest figures.

Figures published by the Office for National Statistics (ONS) have shown inflation falling for six straight months to March.

Scotiabank economist Alan Clarke said it was expected to have risen in April to reflect flat petrol prices compared to a period last year when they dropped, as well as a later Easter in 2014 making airfares relatively higher.

Howard Archer of IHS Global Insight said the 1.6% reading in March may have marked a low point for inflation though it "seems likely to remain below 2% until the end of the year".

Oil and gas prices rose by less compared with a year ago while the stronger pound and limited food price increases were keeping it down, he added.

Philip Shaw of Investec expected inflation to remain at 1.6% for April, due to food prices as well as lower water charge increases and more modest alcohol duty hikes in this year's budget.

Samuel Tombs of Capital Economics said: "While inflation is likely to have risen in April, this will probably be just a blip in its downward trend."

The Bank of England last week said it expected inflation to remain at or below its 2% target for the next few years, easing pressure on it to hike interest rates.

It has been helped by a 10% rise in the value of sterling since last year, keeping the cost of imported goods down.