Inflation UK: Rate falls below double figures

Inflation has eased back to its lowest level since March last year, but remained higher than expected as food prices continued to rise at a near record pace.

The Office for National Statistics (ONS) said that Consumer Prices Index (CPI) inflation fell to 8.7% in April, down from 10.1% in March, as last year’s energy price hikes were not repeated.

It marks the first time inflation has been in single digits since last August, but it was higher than forecast by economists, who had pencilled in a drop to 8.2% in April.

The drop does not mean prices have fallen — merely that they are not rising as fast as they have recently.

ONS chief economist Grant Fitzner said: “The rate of inflation fell notably as the large energy price rises seen last year were not repeated this April, but was offset partially by increases in the cost of second-hand cars and cigarettes.

“However, prices in general remain substantially higher than they were this time last year, with annual food price inflation near historic highs.”

The figures showed food CPI inflation at 19.3%, down only slightly on March’s eye-watering 19.6%.

Chancellor Jeremy Hunt said: “Although it is positive that it is now in single digits, food prices are still rising too fast.

“So as well as helping families with around £3,000 of cost-of-living support this year and last, we must stick resolutely to the plan to get inflation down.”

The steep fall in CPI reflects last April’s sky high rise in energy bills dropping out of the calculation, with the energy price cap having jumped higher a year ago as wholesale prices rocketed after Russia’s invasion of Ukraine.

Last April, the energy price cap soared by 54% to £1,971, but this year the Energy Price Guarantee (EPG) has been kept at £2,500 since last October.

Ofgem is set to confirm on Thursday that energy prices will fall sharply for households in July, when the current EPG comes to an end.

Forecasters at Cornwall Insight are expecting the price cap to fall to £2,053.77, below the EPG for the first time since it was introduced last October.

But inflation has been stubbornly higher than predicted, with the rate of food CPI the second highest for more than 45 years.

Shadow chancellor Rachel Reeves said: “As bills keep surging, families will be worried food prices and the cost of other essentials are still increasing.”

The Bank of England’s top bosses admitted to MPs on Tuesday that it made errors in its forecasting of UK inflation, but governor Andrew Bailey insisted that inflation had “turned the corner”.

It predicted earlier this month that inflation would fall to 5.1% in the fourth quarter of 2023, narrowly seeing the Government hit its target to halve inflation by the end of the year.

April’s big drop in the rate of inflation may take some of the pressure off the Bank to keep increasing interest rates, now at 4.5%, but Samuel Tombs at Pantheon Macroeconomics said it was “too small a drop for the MPC to stop hiking in June”.

The latest data also showed the CPI measure of inflation including housing costs (CPIH) fell to 7.8% in April from 8.9% in March, while the Retail Prices Index (RPI) slowed to 11.4% from 13.5% in March.