UK consumer inflation reached its highest level in 13 months driven by high food and fuel costs, according to the Office for National Statistics. The Consumer Prices Index (CPI) hit 3% on a yearly basis in April, up from 2.5% in March. The monthly rate was 0.8%, the biggest leap since May 2001. According to the figures, the Retail Prices Index rose to 4.2% from 3.8%. The inflation data would probably stop the Bank of England cutting interest rates in the near term, analysts said. "It was a pretty horrific headline number," said Lee Hardman, an economist at BTM-UFJ. "It limits the scope for monetary easing from the Bank, it will be hard for them to cut in June." However, some analysts added that the main drivers of price growth were fuel and food costs, which higher interest rates did little to control or rein in. UK inflation jumps to 3% in April Listen to Melvyn King, Governor of the Bank of England, presenting this month's Inflation Report. Click here for link. He is quite pessimistic about the short term outlook but believes inflation will be back on target in the near future. He outlines clearly the inflationary pressures currently affecting the UK economy. Most significantly he stated that the NICE decade was over - NICE means non-inflation continuous expansion.
This BBC News clip explains the underlying pressure on prices. Click here for 'Why inflation keeps rising'.
Why do analysts think that further interest rate cuts are unlikely? What are the main causes of the current increase in prices? What type of inflation is this?
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