Inflation in the U.K. jumped to 3% in April, up from 2.5% in March according to the Office of National Statistics. The figure is the highest in more than a year and exceeded the consensus of 2.6%.
This marks the seventh straight month in which inflation has surpassed the Bank of England’s target of 2%, suggesting that the BoE will be hard-pressed to lower rates and provide needed stimulus to an ailing economy. Bloomberg:
“This puts the cat among the pigeons in the U.K.,” said Trevor Williams, chief economist at Lloyds TSB Group Plc and a former British government economist. “Interest-rate cuts are totally off the agenda. The underlying problem we face in the real economy is inflation.”
The pound rose and gilts fell after the report showed inflation, stoked by food and energy costs, is now within 0.1 percentage point of the government’s upper limit. Policy makers have cut the benchmark interest rate three times since December to 5 per cent to avert a recession as house prices fall, with a report today showing the most widespread declines since at least 1978.