LONDON (Reuters) -British inflation jumped to a higher-than-expected annual rate of 3.5% in April from 2.6% in March, official figures showed on Wednesday.
A Reuters poll of economists had pointed to a reading of 3.3% in April while the Bank of England earlier this month projected inflation of 3.4%.
April saw increases in gas, electricity and water prices, alongside higher taxes on employers – all of which are likely to push up prices.
Earlier this month the BoE predicted that inflation would peak at 3.5% this year.
Some officials at the central bank disagree with its key assumption that the climb in inflation will not have longer-running effects on pricing behaviour.
BoE Chief Economist Huw Pill said on Tuesday the pace of interest rate cuts had been too fast given still strong wage pressures on inflation, but his vote this month to keep borrowing costs on hold was likely to prove “a skip” not a halt.
Interest rate futures are pointing to an 85% chance that the BoE will leave interest rates on hold next month, with fewer than two 0.25 percentage-point cuts priced in by the year’s end.
The BoE lowered interest rates by a quarter point to 4.25% on May 8 in a three-way split vote, with two members of the Monetary Policy Committee favouring a bigger cut, and two – including Pill – favouring a hold.
(Reporting by Andy Bruce; Editing by Muvija M)
Comments