U.K. Inflation Rate Falls to 13-Month Low on Air Fares

U.K. inflation unexpectedly slowed to a 13-month low in April as cheaper air fares more than offset the impact of rising fuel prices.

The rate of consumer-price growth fell to 2.4 percent from 2.5 percent in March, the Office for National Statistics said on Wednesday. Economists had expected no change in the rate. Core inflation eased to 2.1 percent. The pound fell to the lowest level this year after the data.


The Bank of England expects inflation to retreat toward its 2 percent target over the next year as external influences abate, but officials are concerned a lack of spare capacity may be starting to fuel domestically generated price pressures.

After policy makers refrained from raising interest rates this month following a snow-blighted first quarter, money markets now put the chance of a hike in August at about 50-50.

Downward pressure on inflation came from air fares, which fell 0.2 percent over the month compared with an 18.6 percent surge a year earlier, when prices were boosted by the Easter vacation. The Easter holiday was in March this year.

Upward pressure came from auto fuel, with rising crude prices increasing the cost of filling up the tank by 1.2 percent.

The pound fell after the ONS report, dropping 0.6 percent to $1.3352. It earlier touched $1.3349, the lowest level since December.

Soft drink prices saw their biggest ever increase for the time of year — up 2.8 percent from March — following the introduction of a tax on sodas with a high sugar content. However, the impact on inflation was limited, and many retailers haven’t yet passed on the levy to consumers, the ONS said.

Higher oil costs pushed up producer input prices last month, but inflationary pressures have eased sharply over the past year as the effect of sterling’s 2016 depreciation dissipates.

House prices in March rose 4.2 percent from a year earlier, the same as in February. The worst-performing region was London, where values fell 0.7 percent, the biggest drop since September 2009 when Britain was in the grip of the financial crisis.

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