After last month’s fall to 4%, CPI rises to 4.5% 

Commenting on the Consumer Prices Indices (CPI) for April 2011, published today by the Office for National Statistics, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:

“After last month’s surprise fall, the latest figures show inflation has risen to 4.5%, the highest level since October 2008. While these figures are disappointing, it is not entirely unexpected. Mervyn King, in the Bank of England’s latest inflation report, anticipated that inflation may rise to 5% this year, before starting to fall. Although the CPI figures are disappointing, there is some good news from the Retail Prices Index, which has eased marginally. 

“The current inflationary pressures largely originate in sharp increases in energy and commodity prices, and in some part from the Budget measures introduced last month. However, there is hope that the recent fall in oil, gas and other commodity prices will be reflected in lower domestic inflation later in the year.  

“Higher inflation figures will increase calls for a rise in interest rates. However, the MPC must proceed with great caution and avoid any actions that may threaten what is still a fragile recovery. The government’s tough austerity measures are putting considerable pressure on businesses and individuals, and a premature interest rate increase could derail the recovery. We expect to see interest rates increase later in the year, but we urge the MPC to hold its nerve in the short term to allow the economy to grow while absorbing the initial impacts of the measures to tackle the UK’s deficit.”