British consumer price inflation fell more than expected in April to its lowest level in more than a year because of declining food and energy costs, official data showed today.
The Office for National Statistics said consumer prices rose 0.2 per cent on the month, bringing the annual rate down to 2.3 per cent from 2.9 in March. That was the lowest since January 2008 and below analysts' expectations of 2.4 per cent.
The broader RPI measure of inflation, on which many wage deals are based and which includes falling mortgage interest payments, fell to -1.2 per cent, the lowest since records began in June 1948.
The CPI measure remains above the Bank of England's 2 per cent target but policymakers are expecting further sharp declines in inflation and are more focused on reviving growth in an economy that is on track to shrink this year at its fastest since World War Two.
"We're encouraged inflation is starting to come down a little bit quicker and expect it to fall further in the coming six months and fall below 1 per cent over that period," said David Page, an economist at Investec.
June gilt futures pared losses after the weaker-than-expected data. The pound was little changed.
The ONS said the biggest downward effect on CPI inflation came from electricity and gas bills as providers cut prices following last year's record jumps.
Food also had a big downward effect with meat and vegetable prices falling this year compared with rises a year ago. There had been some concern that food prices would keep pushing up inflation given the weakness of the pound.
Tobacco and alcohol prices also had a negative effect on the CPI rate but this could be reversed soon as annual rises in duty are taking place a month later this year than last.
"Inflation has proven to be much stickier than we had thought probable through recent months," said James Knightley, economist at ING.
"However import price inflation is now moderating as sterling stages a recovery from oversold levels and we believe there is much greater scope for lower consumer price inflation rates over coming months."
Reuters