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Pound falls after surprise dip in inflation Pound falls after surprise dip in inflation
(about 1 hour later)
The pound has fallen after lower fuel prices led to a lower-than-expected inflation rate of 2.4% for April, according to the Office for National Statistics. The pound has fallen after lower fuel prices led to a lower-than-expected inflation rate of 2.4% for April.
That was down from 2.8% in March. This was down from 2.8% in March, according to the Office for National Statistics, and the first drop since September 2012.
Falling transport costs, including air fares, saw the consumer prices index (CPI) fall for the first time since September 2012.
But food prices continued to rise as cold weather hit crop production.
Inflation as measured by the retail prices index (RPI) fell to 2.9% in April, from 3.3% the month before.Inflation as measured by the retail prices index (RPI) fell to 2.9% in April, from 3.3% the month before.
The pound fell to $1.5184 from $1.5212 on the news, while the euro rose to 84.67p from 84.58p. The pound fell as traders saw the data as giving the Bank of England more leeway to stimulate economic growth.
The fall came as traders interpreted the data as giving incoming governor of the Bank of England, Mark Carney, more leeway to stimulate economic growth. Petrol and diesel prices fell by 2.1p and 3.9p a litre respectively between March and April, the ONS said. The average price of petrol in the UK is currently £1.33 a litre or £1.38 for diesel.
Petrol and diesel prices fell by 2.1p and 3.9p a litre respectively between March and April, the ONS said. But food prices continued to rise as cold weather hit crop production. Food prices have risen 40% since 2007 and the recent extended period of cold weather has dented crop yields, putting further pressure on fruit and vegetable prices.
The average price of petrol in the UK is currently £1.33 a litre or £1.38 for diesel. Options widen
Food prices have risen 40% since 2007 and the recent extended period of cold weather has dented crop yields, putting further pressure on fruit and vegetable prices. Against the dollar, the pound fell by 0.7% to $1.5156, and dropped 0.5% against the euro to 1.1783 euros.
Analysts said the drop in the inflation rate would give incoming governor of the Bank of England, Mark Carney, more flexibility over introducing measures to boost growth.
The government has signalled that it may be more relaxed about the Bank loosening its grip on inflation in favour of measures to revive the economy.
So far these measures have included a £375bn asset purchase plan, known as quantitative easing, but more recently the Bank has concentrated on its Funding for Lending Scheme, aimed at getting banks to lend more freely to households and businesses.
Philip Shaw, an economist at Investec, said: "It looks as though the economy will be growing moderately and inflation will not be quite as high as the [Bank's] Monetary Policy Committee (MPC) fears. That will certainly make Carney's life easier.
"It is a welcome drop in inflation that should give the MPC more flexibility to restart the asset purchase programme if they want to give more stimulus."