- Ben Brettell, economics editor at stockbrokers Hargreaves Lansdown
Following five consecutive months of falling inflation, the costs of living in the U.K. picked up, and what is more important, inflation rose above average estimates, as air and sea fares pushed the indicator higher. On Tuesday the ONS said consumer prices in the U.K. climbed 1.8% in April from 1.6% in March, that was a 53-month low. The core measure, which strips out volatile energy, tobacco and alcohol prices, also advanced above forecasts to 2%, up from 1.6% a month earlier. The main upward drivers were air fares and sea fares, jointly contributing with 0.4%, with prices jumping 18% and 22% respectively. Despite promising figures, the central bank does not believe inflation will climb towards the official target and, most likely, will remain muted.
The inflation rate has remained below the official target even despite broadening economic recovery, with key labour market strengthening markedly. According to Mark Carney's team, the main reason for sluggish inflation is exceptionally weak productivity as well as remaining slack in the labour market, which constantly keep inflationary pressure in check. In case the Bank of England leaves interest rates unchanged at 0.5%, the inflation rate will be floating around the current level of 1.8% by the end of this year and pick up only up to 1.9% in the second quarter of 2017.
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