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UK inflation climbs to higher than expected 2.7%

19 May 2017

The latest inflation figures were boosted most of all by rising airfares during the Easter holidays which a year ago took place in March.

Inflation hit the highest level in four years during April, beating forecasts and likely ending a two-year period of real wage growth according to the latest inflation figures from the Office for National Statistics.

"Rising prices for clothing, vehicle excise duty and electricity also contributed to the increase in the rate".

The pound strengthened after the data although none of the Bank of England's other rate-setters have so far joined Kristin Forbes in voting for an interest rate rise.

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He added: "Wage data are due later this week and are expected to show that real wage growth has turned negative in the first months of 2017".

The retail prices index, which includes the impact of mortgage costs, rose to 3.5%, up from 3.1% in March.

In its inflation report last week the Bank of England said that CPI would peak at three per cent later this year as the pound's slump since the Brexit vote causes price tags on everyday items to tick higher. Last week, Bank of England (BoE) Governor Mark Carney warned 2017 will be challenging for consumers, with inflation now nearly certain to overtake wage growth. But the combination of sterling's fall and higher oil prices are pushing up inflation across the board for consumers and businesses.

Economists taking part in a Reuters poll had predicted a rise of 2.6 per cent.

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"First, the timing of Easter, which came later in 2017 and as a result kept inflation subdued in March but boosted it in April".

Similarly, the Urban index rose by 17.62 percent (year-on-year) in April from 18.27 percent recorded in March, and the Rural index increased by 16.69 percent in April from 16.47 percent in March.

Airfares climbed 12.8 per cent in the month from February, but overseas accommodation costs fell 9.2 per cent, as the transport and foreign travel sector saw a 1.9 per cent increase in prices in March.

The worse than expected earnings figure meant that real terms pay - adjusted for inflation - fell by 0.2% in the first three months of the year.

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The "All Items Less Farm Produce" or Core sub-index, which excludes the prices of volatile agricultural produce eased by 14.80 percent during the month, 0.60 percent points from 15.40 percent recorded in March as all key divisions which contributes to the index increased.