Inflation rises to 4.5%
The UK Consumer Prices Index (CPI) annual rate of inflation rose to 4.5% in April, up from 4% in March, it was revealed yesterday.
The rise was due to a jump in transport costs, particularly Easter rises in air and sea fares, and alcohol and tobacco.
However, the Retail Prices Index (RPI) measure of inflation - which includes mortgage interest payments - fell slightly to 5.2% from 5.3% in March.
The rise in CPI was bigger than analysts had forecast and follows a surprise fall in the index last month.
CPI is now at its highest level since October 2008.
The Office for National Statistics (ONS) said “by far the largest upward effect” on prices came from air transport, where fares rose by 29% between March and April. Sea fares rose by 22.3%.
The Governor of the Bank of England Mervyn King was forced to write a letter to Chancellor George Osborne explaining why the inflation rate was more than 1% above the Bank’s target rate of 2%.
He reiterated his view that high inflation was due to the “increase in VAT to 20% in January, higher energy prices and increases in import prices”.
Angela Eagle MP, Labour’s shadow chief secretary to the Treasury, said: “Across the country millions of people on low and middle incomes are being squeezed from every direction by rising prices made worse by the Tory VAT rise.
“The squeeze has been compounded from last month by cuts to tax credits, cuts to childcare support and the child benefit freeze.
“And to make matters worse George Osborne’s decision to raise VAT at a time of rising world food and oil prices looks increasingly like an own goal as high inflation continues to threaten a rise in mortgage rates for homeowners.
“The Bank of England has been put in an impossible position by George Osborne.
“It has been left to do all the work to support a recovery that’s been choked off by the Tory-led Government’s fiscal policy to cut deeper and faster than any other major economy in the world.”