IT’S OFFICIAL: UK prices are rising by 2.7% per year – smashing the Bank of England’s attempts to keep the rate below 2%. That’s off target by a whopping 33% and a staggering 0.4% up on last month’s annual figure.
Economists pointed to various one-off factors which influenced the increase. Blame fell on Easter for being late this year! Odd though this sounds, there is a rational explanation: air fares were hiked up as airlines profiteered from the extra volume of traffic. This shows up as an increase in the cost of air travel compared with last April.
Other one-off factors pushing up the rate include an increase in the price of clothing (up 1.1% from last month), the cost of vehicle excise duty and electricity prices. However, the prices of petrol and diesel fell over the same period.
The Bank of England has already warned that the Consumer Price Index may hit 3% this year as a result of uncertainties caused by the Brexit process: these reduce the value of the UK currency, which increases the price of imports. There is no sign of that factor ending, but there are signs that oil producers may manipulate the market and bring oil prices down, which would help keep business costs down.
With employers forecasting that wages will only increase by 1% in the coming year, this means that UK workers will take yet another pay cut this year. The news on inflation comes a week after the Bank of England warned that this will reduce consumer spending – and revised its forecast of growth this year from 2% to 1.9%.
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Employers predict bad news on pay