Inflation rise forecast as living costs set to jump

Households face a further'¨jump in inflation as the '¨Brexit-hit pound, utility price hikes and the timing of the Easter holidays drive up the cost of living.

A rise in air fares is among the factors likely to fuel a jump in inflation.

The Consumer Price Index measure of inflation is expected to reach 2.6 per cent in April – the highest since September 2013 – when official figures are released tomorrow.

It would mean the squeeze on consumer spending ­continued last month after a respite in February and March when CPI paused at 2.3 per cent.

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Samuel Tombs, chief UK economist at Pantheon 
Macroeconomics, said the CPI could even reach 2.7 per cent, with upward pressure coming from the airline industry.

Airline prices are expected to have soared last month because the Easter holiday fell on 16 April this year rather than 27 March in 2016.

He said: “Prices for airline travel tend to rise very sharply around the Easter holidays, which will add 0.2 per cent to the inflation rate.”

The way the Office for National Statistics measures prices means Npower and Scottish Power’s decision to increase gas and electricity prices in March will also affect April’s CPI rate.

Mr Tombs added: “Government changes to vehicle excise duty in April also made it more expensive to buy a new car than before. Retailers will continue to pass on higher import prices to consumers, adding another 0.1 per cent to the rate as sterling’s shock comes through.”

The Bank of England said in its latest inflation report that CPI would peak at three per cent later this year as the pound’s slump since the Brexit vote causes prices to edge higher. Despite inflation’s upward march, the Bank’s monetary policy committee voted to keep interest rates unchanged on Thursday, with outgoing policymaker Kristin Forbes the sole dissenter.

However, the minutes suggested the next move in rates would be a rise, with other
MPC members repeating that it would take “little further
upside news” for them to 
consider joining Ms Forbes in voting for a hike.

The Bank said the pound’s gains after the general 
election would help inflation drop in 2018 and 2019.

Inflation held steady in March after rising food and clothing prices were offset by a drop in the cost of flights and fuel.

The biggest rise came from food and non-alcoholic beverages, with prices at their 
highest level for three years at 1.2 per cent for the 12 months to March.