UK consumer price inflation exceeded expectations in April on higher energy prices, the Office for National Statistics said on Wednesday.
Consumer prices advanced 1.5 percent year-on-year in April, more than double the March’s 0.7 percent increase. A similar higher rate was last seen in March 2020. Prices were forecast to gain 1.4 percent in April.
At the May monetary policy committee meeting, policymakers of the Bank of England said that although inflation is below the 2 percent target, it will rise temporarily above the target towards the end of 2021, owing mainly to developments in energy prices.
The BoE had forecast inflation to rise to 2.5 percent in 2021 and to return to 2 percent in 2022.
Inflation is unlikely to stay above 2 percent for long as energy-related effects go into reverse next year, “reopening” inflation eases and the stronger pound pushes down on inflation, Ruth Gregory, an economist at Capital Economics, said.
While upside risks to inflation remain, the economist suspects that it will only be in 2023 that the effects of a strong economic recovery will have a more sustained upward influence on inflation.
On a monthly basis, consumer price growth increased to 0.6 percent from 0.3 percent in March and in line with economists’ expectations.
Excluding volatile energy, food, alcoholic beverages and tobacco prices, core inflation rose moderately to 1.3 percent from 1.1 percent a month ago. The annual rate also matched economists’ forecast.
Another report from ONS showed that output price inflation climbed to 3.9 percent in April from 2.3 percent a month ago. The expected rate was 3.5 percent. Transport equipment provided the largest upward contribution to the annual growth.
Month-on-month, output price inflation doubled to 0.4 percent, as expected, from 0.8 percent.
At the same time, input prices grew 9.9 percent on year, following a 6.4 percent rise in the prior month. The rate was also above forecast of 9 percent.
On a monthly basis, input prices gained 1.2 percent versus a 1.9 percent rise in March and economists’ expectations of 1.1 percent.