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UK Inflation Rises above expectations to 1.8%

CPI data released by the Office for National Statistics (ONS) this morning, was slightly higher than expected, and up on March. The release for April was 1.8%, with the expectations of 1.7% versus March’s 1.6%.  This is still below the Bank of England’s 2% inflation target, but it was the first increase of inflation in 10 months.

The ONS noted that the increase was primarily attributed to transport costs; notably air fares, sea fares and motor fuels. The release also highlighted the timing of Easter as a potential contributing factor to the uptick in the index.

The Governor of the Bank of England Mark Carney stated at the quarterly inflation report that the increase in interest rates would not be for some time and that it would be a gradual rise.

Some economists are calling for an increase interest rates to curb a potential property bubble, however the BoE has noted that rising property prices are a threat to the economic stability, a rate rise isn’t expected until Q1 2015 at the earliest.

Office for National Statistics, Inflation report for April

In the FX markets sterling was bid prior to the release reaching a high of 1.6864, but weakened following the CPI data to settle around 1.6820. 

GBPUSD reaction to CPI Source: Abshire-Smith

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