Energy bills push inflation to 2019 high

UK economy stable despite political turmoil, data show

UK economy stable despite political turmoil, data show

CPI inflation increased from 1.9% in March to 2.1% in April - above the Bank of England's 2% target - according to the latest ONS data.

Surging gas and electricity prices have pushed inflation to its highest level this year, with the Consumer Prices Index hitting 2.1pc in April. However, this was below the 2.2 per cent that had been forecast by economists.

"The upward movement partially reflected the response from energy providers to Ofgem's six-month energy price cap, which came into effect from 1 April 2019", the ONS said. Economists had anticipated that the lifting of the cap would add 0.3 percentage... Computer game and package holiday prices helped to offset the impact of the higher bills.

Household bills for electricity and gas rose last month as utility companies took advantage of the government's decision to lift the cap on energy costs. This was one of the first increases after nearly three years of decline in house price inflation in the wake of the June 2016 Brexit referendum - although house price inflation remains well below the rate of earnings growth.

Financial markets were expecting inflation to rise last month and had been forecasting a slightly bigger increase.

The ONS figures also suggested less short-term pressure in the pipeline for consumer prices than expected.

Unlike for most of 2017 and 2018, the rise in inflation over 2 per cent is not related to the depreciation of sterling, which raised import prices in the wake of the Brexit vote. Samuel Tombs, economist at Pantheon Macroeconomics, said that with Brexit related uncertainties intensifying "it is easy to envisage circumstances in which it would fall significantly further".

Suren Thiru, head of economics at the British Chambers of Commerce, said there was little reason for the Bank of England's Monetary Policy Committee (MPC) to move rates soon.

The ONS said electricity and gas prices rose between March and April 2019 by 10.9% and 9.3%, respectively. These were up 3.8% in the year to April compared to a 3.2% increase in the year to March.

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