CPI inflation hits 3% as energy and food costs soar
13/05/2008
Higher energy and food costs pushed consumer inflation up its highest level in over a year in April and potentially scuppering the prospect of a further interest rate cut next month.
Consumer Price Index (CPI) annual inflation - the government's benchmark measurement - rose to 3% in April from 2.5% in March. Higher gas, electricity and heating oil prices contributed the largest part of the price rise, the Office of National Statistics (ONS) said.
Rising prices for food such as meat and fruit, computer games and furniture also added to inflation, as did an increase in excise duty, which pushed up the price of alcohol and tobacco.
However, a reduction in air fares following price rises in March helped limit the rise. While higher oil prices continued hitting the headlines in April, petrol prices actually had a downward effect on the inflation figures.
The average price of petrol increased by 1.9p a litre to 108.2p between March and April, compared with a rise of 3.4p last year. The factors contributing to CPI inflation also helped push up Retail Price Index (RPI) inflation - which takes into account housing-related prices - to 4.2% in April from 3.8% in March.
Falling house prices helped prevent a larger rise in RPI inflation, with council tax and vehicle excise duty also having a negative effect on the April figure.
If the CPI figure tops 3%, Bank of England governor Mervyn King will have to write a letter to the Chancellor giving an explanation as to why and what action is being taken to bring it back to the 2% target.
PODCAST
MOBIZINE
