According to the Office for National Statistics (ONS), UK's inflation rate fell to 0.3% in April, from March's rate of 0.5%. UK inflation drops for the 1st time since September, misses 0.5% pace forecast by economists. Data highlights the struggle Bank of England policy makers face to revive price growth.
Falls in air fares and prices for clothing, vehicles and social housing rent were the main reasons for the drop in the rate. The ONS says that air transport prices fell by 14.2% in April, while clothing and footwear prices fell by 0.4% between March and April this year compared with a rise of 0.9% between the same 2 months a year ago. Air fares had risen sharply last month, because Easter was particularly early this year.
However, these downward pressures were partially offset by rising prices for motor fuels and for certain recreational goods and cultural services, and by food prices, which were unchanged between March and April 2016, having fallen between the same two months a year ago.
“While inflation was weak in April, we may be closer than forecasts indicate to the inflection point when inflation starts to accelerate. A combination of rising energy costs, higher US rates, and lower £ sterling could bring inflation forward and trigger rising interest rates before the end of 2016.” said Nick Dixon, Investment Director at Aegon UK.
The Bank of England said last week that it expected inflation to increase in the second half of the year. Sterling slips across the board after weak inflation print. EUR/GBP bounces off lows near 0.78 handle, trades at 0.7830 at 0900 GMT.
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