Bank of England likely to sit on hands despite inflation rising above target
Inflation rose last month, though less than expected, as consumers were stung by higher airfare sand energy costs.
Official figures showed the Consumer Prices Index (CPI) measure of inflation hitting 2.1 per cent, compared with 1.9 per cent in March. Economists had been expecting a figure of 2.2 per cent for April.
Higher household bills were among the contributing factors, after increases to Ofgem’s energ y price cap came into effect. Transpor t costs were also on the rise, especially for flights, due to the timing of Easter.
It is the first time in 2019 that the CPI rate has risen above the Bank of England’s 2 p er cent inflation target.
Howard Archer, chief eco - nomic advisor to the EY Item Club think-tank, said it was unlikely to prompt the central bank into hiking interest rates in the near term given “ongoing Brexit uncer tainties and a fraught domestic political environment”.
He added: “We believe it is most likely that the Bank of England will sit tight on interest rates through 2019, keeping them at 0.75 per cent. We then expect two 25 basis point hikes in 2020 taking interest rates up to 1.25 per cent by the end of next year.
“However, we would not rule out one 25 basis p oint hike over the summer.”
The CPI including owneroccupiers’ housing costs (or CPIH) was 2 per cent in April, up from 1.8 per cent in March.
Suren Thiru, head of eco - nomics at business membership organisation the British Chambers of Commerce (BCC), said: “While consumer prices are likely to drift slightly higher in the near term, the outlook for inflation remains relatively subdued with the current pressure on prices largely due to a number of temporary factors, such as rising energy costs.”