Why falling inflation masks some nasty surprises

Another interest rate rise is coming, to 4.75 per cent – and it may not be the last, writes James Moore

Food prices remain a blackspot as inflation overshot most forecasts (PA)

Well, we’re finally out of double figures. The headline Consumer Prices Index (CPI) rate of inflation for April came in at 8.7 per cent against 10.1 per cent in March.

It’s a steep fall, but a lot less steep than most had hoped or expected; a Reuters poll of economists predicted 8.2 per cent, while the Bank of England’s more conservative forecast was 8.4 per cent.

Set against those numbers, that result represents a substantial overshoot, especially when you consider that energy – the principal cause of the worldwide inflationary spike – is now playing less of a role, with bills expected to ease compared to last year.