UK consumer inflation rises to 3 ½-year high of 2.7 percent

UK consumer inflation rises to 3 ½-year high of 2.7 percent

UK consumer inflation rises to 3 ½-year high of 2.7 percent

The Bank said in its inflation report that CPI would peak at 3% later this year as the pound's slump since the Brexit vote causes price tags on everyday items to climb higher.

Consumers have been forced to tighten their belts since the pound's Brexit-induced fall over the a year ago pushed up the up the cost of living, the Bank of England said.

That meant pay, adjusted for inflation, fell by 0.2% in the first three months of the year, the first fall since the third quarter of 2014.

An earlier government statement claimed March data pointed to an "annual house price increase of 4.1 percent which takes the average property value in the U.K.to £215,847 ($278,000)".

"The upward effect for transport came mainly from air fares, with a rise of 18.6% reflecting the usual pattern of increasing prices around Easter".

ING economist James Smith said the above-consensus rise will "test the patience of some of the Bank of England's hawks", but expects interest rates to remain on hold for the next two years.

The Consumer Price Index (CPI) which measures inflation recorded a 0.02 percent decline in April, the National Bureau of Statistics, NBS, said on Tuesday. 'It could edge back in May, but it is highly unlikely to have peaked yet, ' said Howard Archer, chief European and United Kingdom economist at IHS Markit.

However, as growth and inflation pick up, a move towards tightening the policy bias with a cumulative 50 bps repo rate hike in 2018, starting next April, is expected.

GDP growth slowed to 0.3 per cent in the first quarter while total hours worked increased by 0.8 per cent.

"This could create higher levels of economic insecurity and could have serious implications for consumer spending, which has helped to support economic growth in recent months,".

The markets are now projecting a higher inflation ahead although analysts and economists commented that the market is now underestimating the already high inflation rate which would go on in the near future.

The fashion sector suffered most seeing the highest rise in prices for six years.

The index for Food and Non-Alcoholic Beverages, which accounted for 30.2 per cent in the CPI weights, increased 4.1 per cent in April 2017.

Ballooning import prices triggered by the Brexit-hit pound are a key factor behind the rise in everyday prices as companies pass on rising costs to consumers.

Wage growth excluding bonuses came in at 2.1 per cent for the three months to March and fell 0.2 per cent in real terms during that period.

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