Inflation eases less than hoped, as food prices soar
Soaring food prices have seen UK inflation ease back far less than expected in April, keeping up the pressure on households and raising the spectre of yet more interest rate rises.
The Office for National Statistics said Consumer Prices Index (CPI) inflation fell to its lowest level for more than a year last month, at 8.7% down from 10.1% in March, as energy prices stabilised after sky-high rises a year ago.
But it was higher than forecast by economists, who had pencilled in a drop to 8.2% in April, and more than the Bank of England had predicted just two weeks ago.
The figures showed food inflation at 19.3%, down only slightly on March's eye-watering 19.6% and remaining close to the highest rate since the late 1970s.
Chancellor Jeremy Hunt admitted food prices are ‘still rising too fast’.
He said: ‘Today's fall in inflation... shows we're on the right track but there is no room for complacency.
‘It's tough right now but things will get better,’ he added.
Economists said another rise in interest rates was looking increasing likely after inflation had not fallen as fast as hoped.
Rates are at 4.5% because the Bank of England has voted for 12 successive hike sin a row to try to curb the cost crisis. Financial markets are pricing in rates to hit nearly 5.5% after the latest inflation shock.
The steep fall in CPI, to its lowest level since last March, reflects last year's initial skyhigh rises in power bills dropping out of the calculation.
Last April, the energy price cap le apt up by 54% to £1,971 after Russia' s invasion of Ukraine sent wholesale gas and electricity prices rocketing.
But this year the Energy Price Guarantee (EPG) has been kept at £2,500 since last October.
Ofgem is set to confirm today that energy prices will fall sharply for households in July, when the current EPG comes to an end.
Consultancy firm Cornwall Insight predicts the price cap will fall by £446 to £2,054 a year – a figure based on falling worldwide wholesale energy prices.
But inflation has been stubbornly higher than predicted, raising doubts over the Government's ability to meet its target to halve inflation by the year end.