Inflation hits 4.5%

Latest price inflation figures published this month show the Consumer Price Index (CPI) was 4.5 per cent in April, up from 4.0 per cent in March. The last time CPI annual inflation was higher was September 2008 when it stood at 5.2 per cent (the record high for CPI).

The rate of increase of the Retail Prices Index (RPI) came down, from 5.3% in March to 5.2% for the year to April bringing CPI and RPI even closer together.

However it worth noting the timing of Easter 2011 had a significant impact on certain travel costs included in the CPI due to the collection periods for air transport, sea transport and international rail travel including the Easter holidays. Easter in 2010 was much earlier and did not affect the April 2010 CPI.

Latest price inflation figures published this month show the Consumer Price Index (CPI) was 4.5 per cent in April, up from 4.0 per cent in March. The last time CPI annual inflation was higher was September 2008 when it stood at 5.2 per cent (the record high for CPI).

The rate of increase of the Retail Prices Index (RPI) came down, from 5.3% in March to 5.2% for the year to April bringing CPI and RPI even closer together.

However it worth noting the timing of Easter 2011 had a significant impact on certain travel costs included in the CPI due to the collection periods for air transport, sea transport and international rail travel including the Easter holidays. Easter in 2010 was much earlier and did not affect the April 2010 CPI.

The largest upward pressures to the change in CPI inflation came from transport, alcoholic beverages, tobacco and housing, with the largest downward pressures from miscellaneous goods and services, clothing and footwear.

This spike up in CPI to a 30-month high will inevitably fuel expectations that the Bank will hike interest rates, however we feel The Monetary Policy Committee (MPC) is likely to stick to its long-term view of inflation, which suggests interest rates will remain low so as not to risk damaging fragile economic recovery in the UK with a gradual increase towards the end of the year.

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