UK inflation jumps in April due to soaring Easter travel costs

inspector_monkfish · 17 May 2011 at 8:33AM

09:30 17May11 -UK inflation jumps in April due to soaring Easter travel costs

LONDON, May 17 - Britain's consumer price inflation jumped to a 2-1/2 year high last month, propelled by soaring travel costs around Easter and higher duty on alcohol and tobacco, data showed on Tuesday.

The surprisingly sharp rise reinforces the policy dilemma for the Bank of England, keen to keep interest rates low to support a sluggish economy.

Consumer prices rose 1.0 percent last month -- a rise of a magnitude seen only once before -- taking the annual inflation rate to 4.5 percent, the highest since October 2008, the Office for National Statistics said.

Analysts had expected the annual rate to tick up to 4.2 percent after a surprise dip to 4.0 in March.

Particularly worrying was a jump in "core" inflation, which strips out volatile items such as food and fuel. This rose to 3.7 percent, the highest annual rate on record.

Consumer price inflation has been above the Bank's 2 percent target since December 2009, and the central bank warned in its inflation report last week that it may rise to 5 percent this year.

The statistics office blamed the unusually late timing of Easter this year for the jump in travel costs which added 0.36 percentage points to the change in the annual rate between March and April. It noted that in previous years, some of that was reversed in the following month.

The retail price inflation gauge, which includes more housing costs and is the benchmark for many wage deals, eased slightly to 5.2 percent, as expected.

The Bank of England, which says most of the factors pushing up prices are only temporary, faces a tricky balancing act of taming inflation over the medium term without damaging a fragile recovery at a time of public spending cuts, tax rises and economic uncertainty.