Inflation has leapt to 4.5%, its highest for two-and-a-half years, surprise figures out today show.
Most analysts had expected the UK Consumer Prices Index (CPI) annual rate of inflation for April to come in at 4.2 per cent. The Treasury blamed today’s figure – up from 4% in March – on much higher air and sea transport costs. Air fares rose by 29% between March and April and sea fares by 22.3%.
The late Easter also distorted the figures, the Treasury said, while the prices of alcoholic drinks and tobacco rose by a record 5.3% in April.
The Retail Prices Index (RPI) measure of inflation – which includes mortgage interest payments – fell slightly to 5.2% from 5.3% in March.
With annual wage rises now averaging 2% – less than half the inflation rate, consumer spending is likely to come under even more pressure as households tighten their belts.
Today’s increase meant Governor of the Bank of England Mervyn King was again forced to write to Chancellor George Osborne explaining why inflation remains above the Bank’s 2% target rate.
He said the overshoot was largely due to January’s rise in VAT and higher energy and import prices.
But he warned that reacting too quickly to rising prices could
