LONDON (dpa-AFX) - U.K. consumer price inflation eased more than expected in April reflecting the fall in energy bills due to the price cap but the slowdown is expected to be temporary given the spike in oil prices amid the ongoing war in the Middle East.
Consumer price inflation slowed to 2.8 percent in April from 3.3 percent in March, the Office for National Statistics said Wednesday. That was lower than the 3.0 percent economists had forecast.
Similarly, excluding food, energy, alcohol and tobacco, core inflation softened to 2.5 percent from 3.1 percent in March.
British Chambers of Commerce Research & Economics analyst Caterina Batog said the fall in inflation is likely to be a temporary quirk due to the timing of some prices changes rather than a signal on the direction of travel.
Batog noted that today's data is unlikely to encourage the Bank of England to consider further interest rate reductions. The trajectory of the conflict in Iran and energy prices will be key factors in determining the central bank's next decision.
Last month, the BoE had maintained its bank rate at 3.75 percent. Markets had been pricing in a one-and-done interest rate hike for June.
ING economist James Smith said benign inflation data reduces the chances of a June rate hike.
The Confederation of British Industry Deputy Chief Economist Alpesh Paleja said inflation data does not yet fully capture the inflationary impact of developments in the Middle East. The economist said inflation is likely to rise again in the months ahead, potentially peaking around the turn of the year.
ONS data showed that electricity and gas prices made the largest downward contribution to annual inflation. Package holidays also exerted downward pressure on the overall rate.
The increase in goods prices rose to 2.4 percent from 2.1 percent, while services inflation eased to 3.2 percent from 4.5 percent.
On a monthly basis, overall consumer prices gained at a steady pace of 0.7 percent, which was also weaker than forecast of 0.9 percent increase.
Separate data from the ONS showed that both input and output price inflation accelerated in April due to higher crude oil and refined petroleum product prices.
Factory gate inflation rose to 4.0 percent from 3.0 percent in the prior month, while that was forecast to slow to 2.8 percent. At the same time, input price inflation shot up to 7.7 percent from 5.3 percent a month ago. The expected rate was 5.9 percent.
The ONS also said average house prices remained unchanged on a yearly basis in March compared to an increase of 1.7 percent in February. The annual house price inflation slowed because monthly prices dropped 0.4 percent in March.
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