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Inflation returns to UK as airline tickets and petrol prices rise Inflation returns to UK as airline tickets and petrol prices rise
(about 1 hour later)
Britain’s brief flirtation with negative inflation ended last month, with official figures showing prices rose again in May helped by higher air fares and petrol prices.Britain’s brief flirtation with negative inflation ended last month, with official figures showing prices rose again in May helped by higher air fares and petrol prices.
The Office for National Statistics said its consumer price index measure of inflation was up 0.1% on a year earlier in May after a 0.1% dip in April - the first negative inflation for more than 50 years. May’s reading marked the first rise in the inflation rate since last October and was in line with forecasts by City economists in a Reuters poll. The Office for National Statistics said its consumer price index measure of inflation was up 0.1% on last year after a 0.1% dip in April – the first negative inflation for more than 50 years. May’s reading marked the first rise in the inflation rate since last October and was in line with forecasts by City economists in a Reuters poll.
First rise for seven monthsFirst rise for seven months
The ONS said the main upward pressures on inflation last month came from air fares, which rose this May but fell a year ago. Airline tickets had been a significant drag on inflation when it turned negative in April, with the early timing of Easter this year cited as a likely factor.The ONS said the main upward pressures on inflation last month came from air fares, which rose this May but fell a year ago. Airline tickets had been a significant drag on inflation when it turned negative in April, with the early timing of Easter this year cited as a likely factor.
There was also upward pressure on inflation last month from fuel prices as petrol rose by 2.5p per litre and diesel by 1.5p from the month before. Food prices also played a role, given they fell just 0.1% this May compared with a much deeper decline of 1.1% a year earlier. There was also upward pressure on inflation last month from fuel prices as petrol rose by 2.5p a litre and diesel by 1.5p from the month before. Food prices also played a role, given they fell just 0.1% this May compared with a much deeper decline of 1.1% a year earlier.
There was downward pressure from cheaper toys and computer games.There was downward pressure from cheaper toys and computer games.
The ONS said there was also a slight pick-up in core inflation, which excludes the more volatile items energy, food, alcohol and tobacco. It rose to 0.9% from 0.8% in April.The ONS said there was also a slight pick-up in core inflation, which excludes the more volatile items energy, food, alcohol and tobacco. It rose to 0.9% from 0.8% in April.
Inflation is still way below the Bank of England’s government-set target for 2% and so the its monetary policy committee (MPC) will remain under little pressure to raise interest rates from their record low of 0.5%, where they have been for more than six years. Markets are not pricing in a rise until well into next year. Inflation is still way below the Bank of England’s government-set target for 2% and so its monetary policy committee (MPC) will remain under little pressure to raise interest rates from their record low of 0.5%, where they have been for more than six years. Markets are not pricing in a rise until well into next year.
“The big picture is that inflation is likely to remain extremely low throughout the rest of 2015,” said Samuel Tombs, senior UK economist at the consultancy Capital Economics. “The big picture is that inflation is likely to remain extremely low throughout the rest of 2015,” said Samuel Tombs, senior UK economist at the consultancy Capital Economics. “The UK’s weak inflation outlook is likely to ensure that the MPC keeps interest rates at their record low level for another year or so.”
“The UK’s weak inflation outlook is likely to ensure that the MPC keeps interest rates at their record low level for another year or so.” Responding to the latest figures, the chancellor, George Osborne, sought to highlight the boost to household finances from the combination of low prices and rising wages, which comes after years of pay falling in real terms.
Responding to the latest figures, chancellor George Osborne sought the highlight the boost to household finances from the combination of low prices and rising wages, which comes after years of pay falling in real terms.
“This is good news for working people and family budgets, and shows the economic recovery is going from strength to strength. Of course the job is not done and we will continue to remain vigilant to all risks, particularly when the global economic situation is so uncertain,” Osborne said in a statement.“This is good news for working people and family budgets, and shows the economic recovery is going from strength to strength. Of course the job is not done and we will continue to remain vigilant to all risks, particularly when the global economic situation is so uncertain,” Osborne said in a statement.
Read the Chancellor’s statement on today’s #inflation figures: pic.twitter.com/xrrSARPz4pRead the Chancellor’s statement on today’s #inflation figures: pic.twitter.com/xrrSARPz4p