Inflation Hits 4.5% in April due to UK Holidays
UK inflation hit the highest rate seen in 2-and-a-half years last month, according to figures from the Office for National Statistics (ONS). This prompted Mervyn King, the governor of the Bank of England, to write to Chancellor George Osborne with an explanation as to why the figure is still higher than the 2% target.
From March to April, inflation rose 0.5% to 4.5%, while the average forecast had been 4.2%. It was only last year that the bank estimated inflation would drop to 1.7% by now. Since most of the surge in inflation is due to the record increase in airfares for holidays surrounding Easter, it will likely be temporary. However, the jump in the annual rate will still raise fears of stagflation.
Easter fell sooner in April last year and was too early for the ONS’s mid-month survey to pick up on higher prices. Additionally, there was a perfect storm of factors last month helping to raise airfares 29% and sea travel 22%, according to ONS figures, which show that travel price increases contributed to 0.36% of the inflation rise. Easter weekend came so late that it fell during school holidays and was near other bank holidays too. This meant that more people were taking breaks during the last week of the month than usual, and this sent the cost of travel up.
King said that he expects inflation to rise more in the next few months because of increases to energy prices and utility bills. However, he predicts it will fall back to target after the impact diminishes.