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| UK inflation increases to 2.7% in April according to CPI index, reveals ONS | UK inflation increases to 2.7% in April according to CPI index, reveals ONS |
| (35 minutes later) | |
| Inflation jumped unexpectedly to 2.7 per cent in April, the highest since September 2013, as the slump in the pound since last June's Brexit vote hit home. | |
| The Consumer Price Index was up from an annual growth rate of 2.3 per cent in March and higher than the 2.6 per cent expansion City of London analysts had pencilled in. | |
| Core inflation, which strips out volatile energy and food prices jumped to 2.4 per cent, up from 1.8 per cent previously, and the biggest annual jump since March 2013. | |
| The Office for National Statistics said the biggest contribution to the increase in April's rate came from air fares, although this was related to the timing of the Easter break this year. | |
| Clothing vehicle excise tax and electricity bills also made a contribution to the increase. | |
| The higher than expected increase in Inflation puts the spotlight on the Bank of England's Monetary Policy Committee. | |
| In its Inflation Report last week, the Bank projected inflation to remain below 2.7 per cent until the final quarter of 2017, when it would peak at 2.82 per cent, and the minutes of the MPC's latest meeting reported that more "upside" surprises on prices could prompt more MPC members to vote for an increase in interest rates. | |
| The pound spiked to $1.2957 in the wake of the data, but rapidly fell back to $1.2884, roughly flat on the day. | |
| "Above-consensus UK inflation will test the patience of some of the Bank of England hawks. But we think a household spending squeeze and elevated Brexit uncertainty mean we won’t see rate hikes until 2019," said James Smith, an economist at ING. | |
| "While we still think that the impact of sterling’s depreciation on inflation will be more concentrated this year than the MPC thinks - we see CPI inflation peaking in Q4 at 3.2 per cent - we doubt that a majority will emerge to raise rates this year," said Samuel Tombs of Pantheon Macroeconomics. | |
| Sterling is currently trading 13.3 per cent lower than on 23 June last year. | |
| The currency hit a low of $1.2043 in January, 19 per cent below its peak on the night of the EU referendum. | |
| Separately, the ONS reported that factory gate prices rose by 3.6 per cent in April, higher than City analysts had expected. | |
| However, factory input prices were up 16.6 per cent, an easing from the previous month's 17.4 per cent rate of inflation. | |
| The jump in April's inflation rate means that the squeeze on living standards continues. | |
| The ONS reported last month that average wages grew at an annual rate of 2.3 per cent in the three months to February, meaning that there was no growth after accounting for inflation. | |
| The statisticians will release pay data for the there months to March tomorrow, with City economists expecting growth of 2.4 per cent. | |
| The Bank of England has also said it will be watching average pay data closely for signs of inflation creeping into pay settlements. |