US inflation drops while UK braces for fresh rate rise

PRICES in Britain are rising twice as fast as in the United States, according to official data released yesterday as the Bank of England prepares to raise interest rates again to cool the UK economy.

US inflation, as measured by the consumer price index (CPI), stood at 4.9pc in the year to April, down from 5pc in March, according to official statistics.

The decline was driven by falling food prices, including fruit, vegetables, meat and milk.

By contrast, food prices in Britain continue to rise at the fastest pace in 45 years, while the headline rate remains stubbornly high at 10.1pc in March.

The 10th consecutive slowdown in US price rises will raise expectations that the Federal Reserve will pause its programme of interest rate rises just as Britain braces for more increases.

Threadneedle Street policymakers are expected to raise rates three more times this year to 5pc. The Monetary Policy Committee is expected to lift the benchmark rate today for the 12th straight time to 4.5pc, from 4.25pc.

Stubbornly high inflation means companies and economists are starting to express doubts about Rishi Sunak’s ability to fulfil his pledge to halve the headline rate by the end of this year.

Virgin Atlantic said it expected the CPI to fall to 6.5pc rather than the Prime Minister’s target of 5.3pc by the end of the year. The assessment is set out in the airline’s “plan of record” for this year within annual corporate filings published yesterday.

Some economists are also starting to question whether inflation will fall as quickly as the Bank expects. It forecast that the headline rate will drop to 3.9pc in the final three months of this year.