Inflation rate falls to 0.3 per cent in April due to cheaper clothes and air fares
Inflation was running at 0.3 per cent in April, figures out this morning from the Office for National Statistics (ONS) have shown, denting the trend of slow-and-steady price rises since the start of the year.
The headline consumer prices index (CPI) rate fell back from 0.5 per cent in March and is now in line with figures from January and February.
The fall was attributed to cheaper air fares and clothes prices, which both dipped during April, probably because of the timing of an early Easter in March, which will affect the monthly calculations – making March's inflation rate look higher and April's lower. The cost of transport, which includes air travel, fell 14.2 per cent according to the ONS.
Core inflation, which strips out the most volatile goods like food and energy and is often a more reliable indicator of long-term inflation also fell from 1.5 per cent to 1.2 per cent in April, surprising analysts.
Inflation of 0.5 per cent in March was the highest since the end of 2014, as the tumbling oil price has reduced the cost of living and pushed the UK into a brief period of deflation in September and October last year.
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The pound lost ground against the dollar as the news was announced, falling by 0.2 per cent to $1.4463 in the minutes after the figures were published, as traders expect weak inflation to push the likelihood of the first interest rate rise in the UK since the crisis even further into the distance.
Analysts were more relaxed than the markets about the figures however. Mike Bell, global market strategist at JP Morgan said: "Prices for some services such as restaurants, hotel bills and recreation spending provided some upward pressure on prices suggesting the underlying economy remains relatively healthy, despite some recent signs of a slowdown."
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Both Capital Economics and IHS Global also said the dip should not distract from the overall trend of rising prices.
Michael Martins, an economist at the Institute of Directors, however, said that uncertainty surrounding the EU referendum could push inflation even lower over the next few months: "As consumers hold off on purchases, businesses have begun to hold off on investment. A combination of delayed consumer and business spending will continue to put downward pressure on inflation."
The Bank of England's official forecast, published in last week's Inflation Report, does not have inflation returning to its official two per cent target until mid-2018.