- Reserve Bank of Australia
In line with expectations of the Bank of England, the UK consumer inflation turned negative for the first time since 1960 amid the decline in food and energy prices. The annual rate of the British CPI slid to -0.1% in April from a year earlier, according to the Office for National Statistics. Economists, however, had expected the inflation rate to remain at 0.0%. The consumer inflation was affected by the timing of the Easter holiday, with air and sea fares having the biggest downward pressure on the annual rate. Food prices plunged 3% in April from a year earlier, while fuels and lubricants plummeted 12.3%. The core CPI, a less volatile measure as it irons out energy and food prices, dropped sharply and below market expectations to 0.8%, marking the lowest level since 2001.
With inflation below the BoE's 2% target, policy makers are under little pressure to hike the benchmark interest rate from a all-time low 0.5% for now. Governor Mark Carney said that any period of declining prices will be temporary and an expected pickup in inflation at the end of the year, meaning the next move in borrowing costs is likely to be an increase. The Bank of England predicts CPI to reach the target of 2% in the second quarter of 2017, when based on market interest rate expectations. A separate report showed UK house price inflation rose to 9.6% over the year to March, up from 7.4% a month earlier.
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