CPI inflation at 3%
The Office for National Statistics (ONS) released figures on Tuesday showing that Consumer Price Index (CPI) inflation reached 3 per cent on a yearly basis in April. The figure is up from 2.5 per cent in March.
Consumer morale lowest in over 13 yearsThe monthly rate on inflation was 0.8 per cent, the highest rise since May 2001. The ONS also said that the Retail Prices Index (RPI) rise from 3.8 per cent to 4.2 per cent.
CPI inflation was driven up by higher prices for food, consumables and utility bills. Alcohol and tobacco pushed CPI up the highest due to the tax increases introduced at the last budget. Higher power and gas costs added 0.2 per cent to the CPI figure.
These latest figures are unlikely to be welcomed by the Bank of England. The Bank's target for inflation is 2 per cent. The Governor of the Bank of England Mervyn King will be required to write a letter of explanation to the Chancellor if the rate of inflation rises above 3 per cent.
The news also has implications for the Bank's Monetary Policy Committee (MPC). So far the MPC has been reluctant to reduce interest rates drastically to fight the effects of the credit crunch because of concerns that such a move could lead to higher inflation.
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