UK consumer inflation rises to 3 ½-year high of 2.7 percent

EUR  USD 1.1000 U.K. Inflation and JPY as the Favored Funding Currency
UK consumer inflation rises to 3 ½-year high of 2.7 percent
Author

17 May, 2017

As for RON97, the average price increased to RM2.48 in April 2017 compared to RM2.05 in April 2016.

Input prices, a measure of the costs faced by businesses, grew by 16.6 per cent during the month.

Core inflation, which excludes food and fuel prices, also eased appreciably to an 18-month low of 4.5% in April 2017 from 4.9% in March 2017.

This was partially offset by a fall in the cost of fuel between March and April 2017.

"The rise in food inflation reflects the large increases in rice prices", said Zahid Hussain, lead economist of the World Bank's Dhaka office.

April's 0.3 percentage point increase takes the figure well beyond the Bank of England's 2 per cent target, and above expectations of a rise to 2.6 per cent - though the number is broadly in line with central bank projections released last week.

The figures further highlighted the squeeze facing households with pay rising at just 2.2% in the three months to February - and new official data due out on Wednesday is expected to show a similar picture.

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The big question is whether this is as high as inflation gets.

The Office for National Statistics figures show that United Kingdom inflation is at its highest level since September 2013. Airfares tend to be a fairly volatile contributor to inflation as the timing of holidays has a significant effect on prices.

Since the Brexit vote, inflation has jumped, thanks largely to the fall in the value of the pound since the vote.

"A few months ago, many economists were forecasting that inflation would be much closer to 3% by now", he said. It had, however, increased the reverse repo rate by 0.25 per cent to 6 per cent. The last time inflation was at this level was in 2013.

"Inflation is set to rise to around 3% or higher in the months ahead - with prices likely to be rising faster than wages in the months ahead", Andrew Sentance, senior economic adviser at PwC said.

It is also worth noting that core inflation rose. "As we enter this period of increased inflation, one of the ways people can consider avoiding inflation eating away at their hard earned cash is to seek out alternative investment vehicles".

"Should this beat estimates then we can expect the pound to rally as the spending power of United Kingdom consumers avoids being eroded further by the post-referendum drop". "Despite inflation overshooting estimates, the pound was unmoved against the dollar", he said.


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