U.
K. inflation slowed more than economists forecast in April to a seven-month low and producer prices rose the least since 2009 as fuel costs fell. Consumer prices rose 2. 4 percent from a year earlier, down from 2.
8 percent in March, theOffice for National Statistics said in London today. The median forecast of 35 economists in a Bloomberg News survey was 2. 6 percent. Core inflation also cooled, while factory-gate prices increased at the slowest annual pace in 3 1/2 years.
The pound weakened. The Bank of England lowered its forecasts for inflation last week and said price growth may hit its 2 percent target earlier than previously estimated. The central bank, which also raised its growth projections, kept its bond-purchase program at 375 billion pounds ($569 billion) this month. Minutes of the decision to be published tomorrow will show whether Governor Mervyn King continued his bid to boost quantitative easing.
“Looking to short-term inflation in the U. K. it is still likely to move higher in subsequent months,” said David Tinsley, an economist at BNP Paribas SA in London. Still, the data “support our view that inflationary pressures are set to wane due both to lower imported price pressures and because domestic cost pressures are subsiding.
” The pound extended its decline against the dollar after the data, falling toward a six-week low.It was trading at $1. 5173 as of 11:05 a. m.
London time, down 0. 5 percent from yesterday. Against the euro, it weakened 0. 5 percent to 84.
82 pence. Transport costs subtracted 0. percentage point from the annual inflation rate. The majority of that came from gasoline, the statistics office said.
Today’s figures are “good news for families and businesses,” with inflation down by more than a half from its peak of 5. 2 percent in September 2011, the U. K. Treasury in London said in a statement.
Analysis: Basically, British economy has been struggling to rebound back the level before 2008, the two major political parties are currently on a negotiation of whether the government should become less involve into the market policy.In other word, should government once again step out from the market and let market run completely on its own again? As one of the important measurement of the current status of economy, inflation rate sometime could determine whether the market is on the right track or not inflation is “no longer an obstacle” to the BOE doing more QE, though they may be less inclined in that direction after raising their growth projections this month. The central bank sees the economy growing 0. percent this quarter after 0.
3 percent expansion in the three months through March. In UK, its political system at the operation level is very similar to US congress, two parties take turn to run the administration office, both parties share a very common interest that they both wish the best to economy, under this mutual understanding, they need to fighting against each other to come out a solution that is best for both parties, even the whole nation.
