UK inflation fell back into single digits in April as energy prices dropped, but by far less than the City expected, while core inflation unexpectedly increased, figures from the Office for National Statistics showed.
The Consumer Prices Index rose by 8.7% in the 12 months to April, down from 10.1% in March, and below predictions of a fall to 8.2%.
Core CPI (excluding energy, food, alcohol and tobacco) rose by 6.8% in the 12 months to April, up from 6.2% in March, which is the highest rate since March 1992.
The data left analysts expecting more rate rises from the Bank of England.
“A further increase in Bank Rate to 4.75% at the MPC’s next meeting on June 22, from 4.50%, now is firmly on the table,” said Samuel Tombs at Pantheon Macroeconomics.
Strong wage growth is likely to keep services inflation high throughout this year, according to Martin Beck, chief economic advisor to the EY ITEM Club. He does not expect inflation to return to the Bank of England's 2% target until well into 2024.
The EY ITEM Club agreed that “another rise in interest rates next month is looking increasingly likely”.
ING Economics said food prices are now the biggest headache. “We're now in an unusual situation where food inflation - at around 19% YoY - has diverged noticeably from the relevant producer output price measure.”
Electricity and gas prices contributed 1.42 percentage points to the fall in inflation in April as last April’s rise dropped out of the annual comparison.
Food and non-alcoholic beverage prices continued to rise in April but the annual inflation rate of food and non-alcoholic beverages eased marginally, from 19.2% in March to 19.1% in April.