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Inflation across the UK has risen to its highest level in over a year, more than doubling last month as higher petrol prices and gas and electricity bills pushed up the cost of living.
The Consumer Prices index rose by 1.5% in the 12 months to April 2021, new figures from the Office for National Statistics show.
That’s the highest reading since March 2020, and more than double the 0.7% recorded in March 2021.
During April alone, prices rose by 0.6%.
The jump in inflation was driven by rising household utility bills, with the cap on energy bills being lifted.
Motor fuel prices also had an upward impact on the inflation rate, as the jump in crude prices fed through to the pumps.
The ONS added that clothing had pushed up the inflation rate in April, saying:
Price movements for household utilities, clothing, and motor fuels are the main reasons for the higher monthly rate this year than a year ago.
Inflation worries have been weighing on the financial markets for weeks, as it could force central bankers to slow their bond-buying stimulus programmes or consider raising interest rates.
The Bank of England’s target is for inflation to be around 2% in the medium term.
Economists and investors expect inflation will keep rising in the next few months, as the economy emerges from lockdown.
Jon Hudson, fund manager of Premier Miton UK Growth Fund, says:
“Inflation is likely to continue rising throughout the year as lockdowns ease, the economy recovers and various commodity shortages feed through to rising prices. The recent strength of Sterling will act as a buffer for inflation as it reduces the cost of imports.
European stock markets are set to fall at the open, after a late selloff on Wall Street last night.
Kyle Rodda of IG says:
The S&P500 ended the session’s trade down by 0.85 per cent, in what was a fairly broad-based session of losses for the US stock market. Value sectors led the losses, with energy, financials and industrials at the bottom of the intraday market map. However, there was no clear rotation into value, and only a slight preference for defensiveness, with growth and the tech-sector also down, and only a small bid coming through for health-care and real estate stocks.
Energy’s weakness came-in sympathy with a fresh drop in oil prices overnight. Crude fell after news hit the headlines that progress was being made between the US and Iran on a new nuclear deal. The sell-off was retraced after the Russians later came-out to throw cold water on the story. But the move illustrated a slight wariness in the market about any factor that could boost global oil supplies at this time – although there is debate about what impact, if any, Iran’s return to global energy markets would have on prices.
Cryptocurrencies are sliding too, with bitcoin dropping below $40,000 to its lowest since February.
- 7am BST: UK consumer inflation, and producer prices report, for April
- 9.30am BST: UK house price index for March
- 10am BST: Eurozone consumer inflation for April
- 12pm BST: US weekly mortgage applications
- 7pm BST: US Federal Reserve releases minutes of its last meeting