Inflation fears subside

15-05-2007

Inflation fears subside
Inflation in Britain fell back in April after hitting a ten-year high in the previous month, government figures have shown.

The Office for National Statistics (ONS) said that consumer price index (CPI) inflation last month was 2.8 per cent, compared to 3.1 per cent in March.

March's figure led to Bank of England governor Mervyn King being compelled to write to chancellor Gordon Brown explaining why inflation was more than a percentage point in excess of the government's two per cent target.

Earlier this month the Bank's monetary policy committee voted to raise interest rates by a quarter of a per cent to 5.5 per cent, but today's inflation figures make consecutive rises in either June or July less likely.

The ONS says the largest pull factors on inflation in April were falling gas and electricity bills.

"There was also a large downward effect from financial services," a statement said.

"This year, foreign exchange commission rates fell following the abolition of a charge from one major bank; last year, by contrast, average commission rates rose. In addition, fees for overdrafts fell this year but rose a year ago."

And the largest upward effects upon inflation last month came from men and women's clothing, the ONS said, as well as restaurants and cafes.

The retail price index (RPI), which includes mortgage interest payments, meanwhile fell 0.3 percentage points to 4.5 per cent in April.


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