Britain’s annual inflation rate fell sharply to a 13-month low of 8.7 percent in April but prices remain elevated as the country faces a cost-of-living crisis, official data showed Wednesday.
The rate of price increases slowed from 10.1 percent in March, bringing inflation under 10 percent for the first time since August last year, the Office for National Statistics (ONS) said in a statement.
At 8.7 percent, it was the lowest level since March last year, when the rate stood at 7.0 percent.
“However, prices in general remain substantially higher than they were this time last year, with annual food price inflation near historic highs,” noted ONS chief economist Grant Fitzner.
Despite the sharp drop, analysts say the Bank of England is likely to raise interest rates again at its next meeting as April’s figure was above the BoE’s prediction for inflation of 8.4 percent last month.
Britain’s annual inflation rate is also the highest among countries in the Group of Seven rich economies featuring also Canada, France, Germany, Italy, Japan and the United States.
The BoE’s target rate of 2.0 percent remains very far off, while the UK government has said it sees inflation dropping to about 5.0 percent by year-end.
Last month, “the rate of inflation fell notably as the large energy price rises seen last year were not repeated… but was offset partially by increases in the cost of second-hand cars and cigarettes”, Fitzner added.
– Economy boost –
The data comes one day after the International Monetary Fund delivered a major U-turn on its forecast for the UK economy, saying it expected growth this year just one month after predicting a contraction.
Britain’s economy is expected to expand 0.4 percent in 2023, the IMF said in its latest outlook document, which cited weaker energy prices.
The IMF ripped up its previous forecast in April for a 0.3-percent contraction.
“The IMF said yesterday we’ve acted decisively to tackle inflation but although it is positive that it is now in single digits, food prices are still rising too fast,” finance minister Jeremy Hunt said following Wednesday’s data.
UK food price inflation stood at 19 percent in April, around the highest level in more than 45 years.
“With inflation proving stickier than” BoE expectations, “it now seems all-but certain that the Bank will raise interest rates from 4.50 percent to 4.75 percent in June”, forecast Capital Economics chief UK economist Paul Dales.
The BoE earlier this month lifted its key interest rate to the highest level since the 2008 financial crisis, noting inflation remained stubbornly high.
It hiked the rate by a quarter-point to 4.5 percent — its 12th increase in a row, fuelling a cost-of-living crisis across Britain.
UK Prime Minister Rishi Sunak’s Conservative government recently suffered a drubbing in local elections, as voters gave their verdict over rampant living costs despite state efforts to partly subsidise energy bills.
Over the past year, the nation has been plagued by strikes, staged mainly by railway and postal staff but also by teachers and health workers, as high inflation erodes the value of wages.
Policymakers around the world are battling elevated inflation caused largely by runaway energy bills in the wake of last year’s invasion of Ukraine by major oil and gas producer Russia.