This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.theguardian.com/business/2015/jun/16/inflation-returns-to-uk-as-airline-tickets-and-petrol-prices-rise

The article has changed 3 times. There is an RSS feed of changes available.

Version 1 Version 2
Inflation returns to UK as airline tickets and petrol prices rise Inflation returns to UK as airline tickets and petrol prices rise
(about 7 hours 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 that 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 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. 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 uptick marked the first rise in the inflation rate since October. But economists said inflationary pressures remained benign with oil prices lower than a year ago and food prices held down by an ongoing supermarket price war. Most expect inflation to stay low over coming months, putting little pressure on the Bank of England to start raising interest rates from their record low of 0.5%.
“The big picture is of very weak price pressures. Inflation is unlikely to rise significantly above the zero mark for the rest this year,” said Ian Stewart, chief economist at consultants Deloitte.
“With inflation likely to stay below its 2.0% target until 2017, the Bank of England can afford to take its time before raising interest rates. UK consumers will continue to benefit from very weak price pressures and ultra-low interest for some time yet.”
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 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 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 also 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 pickup in core inflation, which excludes the more volatile prices of energy, food, alcohol and tobacco. It rose to 0.9% from 0.8% in April. Core inflation was still surprisingly weak, said Martin Beck, senior economic advisor to the forecasting group EY ITEM Club.
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. “It is difficult to see any reason why inflation will deviate far from zero in the next few months. If anything, there is a good chance that the CPI measure will briefly turn negative again during the summer,” said Beck.
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. Responding to the latest figures, 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.
“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.” “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,” the chancellor said in a statement.
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.
“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
The trades union body, the TUC, said while low prices were a relief for households, they also indicated underlying weaknesses in the UK economy.
“While the downward pressure on prices is in part from exceptional international circumstances, inflation so far below target also shows that the strength and stability of the recovery can’t be taken for granted,” said the TUC general secretary, Frances O’Grady.
“The fundamental problems with the economy have not yet been fixed, and the extreme cuts the chancellor is planning in next month’s budget will only make a lasting recovery harder to achieve.”