The rate of inflation is finally back in single digits for the first time since last summer, easing to 8.7% last month but food inflation remains near 20% and core price inflation is at a 30 year high.
The Office for National Statistics (ONS) said the decline in the consumer prices index measure (CPI) was mainly driven by gas and electricity costs remaining stable in April when compared to the unprecedented leap recorded in the same month last year.
April 2022 saw the energy price cap lifted by 54% to £1,971 to reflect, for the first time, the impact of Russia’s war in Ukraine on European gas and electricity supplies.
Energy costs have been the main source of the cost of living crisis since the invasion, fuelling not only household energy bills but also manufacturing and transport prices which continue to filter through the economy.
But while the pace of price rises slowed it did not fall as much as economists polled by Reuters and the Bank of England expected. A rate of 8.2% had been forecast by economists while 8.4% was expected by the Bank.
And there is no great relief in the squeeze on family budgets because earnings continue to lag the pace of price rises.
Food inflation stood at 19.1% in April, a slight decrease from 19.2% in March.
The Bank of England has been trying to combat upwards pressure on prices through interest rate hikes to dampen demand in the economy.
There is much speculation on whether Bank rate will be raised further next month following 12 consecutive increases.
In its latest assessment of the UK economy, the International Monetary Fund suggested more irate rises were needed as it significantly upgraded its expectations for economic growth.
The Bank is worried about stubborn core inflation, which strips out volatile elements such as fuel and food.
That core rate of inflation rose to 6.8% last month, the highest since 1992 and up from 6.2% in March.
There is concern too among rate-setters that inflation-fighting pay awards risk fuelling price growth ahead.
Chancellor Jeremy Hunt said:
“The IMF said yesterday we’ve acted decisively to tackle inflation but although it is positive that it is now in single digits, food prices are still rising too fast.
“So as well as helping families with around £3,000 of cost of living support this year and last, we must stick resolutely to the plan to get inflation down.”
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IMF expects UK to avoid recession
Economists see the inflation rate easing further as the year progresses, in line with a government target to halve inflation, but say there are risks associated with the looming winter due to continuing energy supply constraints.
A recent forecast by Pantheon Macroeconomics showed CPI inflation likely stable this month but slowing to 7.3% in June and hitting 3.3% in December, reflecting falls in wholesale energy costs over the year to date compared to the stampede for prices seen during 2022.
The energy regulator, Ofgem, is tipped to reveal on Thursday that the price cap will fall to £2,053 per year from July-September.
That is down from the £3,280 level set for March-June which was largely irrelevant as the government’s Energy Price Guarantee was in place.
That taxpayer support ends at the end of June.