Inflation set for sharp fall after energy bill cuts

But stubbornly high prices hamper Bank of England policymakers

The Bank of England will gain some respite in its battle against the rising cost of living this week as figures reveal a sharp fall in inflation during April.

The Bank's inflation benchmark, the Consumer Prices Index, is predicted to slip back to 3.1 per cent after March's first rise in six months to 3.5 per cent.

The fall would still leave the cost of living well above the Bank's2 per cent target, where it has been stuck since 2009, due to VAT hikes and rising global commodity prices.

The Bank has warned that inflation is unlikely to drop back to the target until the middle of next year.

The improvement is likely to have been driven by the last of the price cuts from the energy companies. The Easter holiday falling two weeks earlier than last year also means a longer post-Easter sales period as well as cheaper air fares, said Lloyds Bank Corporate Markets' senior UK economist, David Page.

But Mr Page expects April's fall to be unwound in May as higher water bills kick in. "The general trend is that there are some upward pressures coming through. We are expecting sticky inflation above 3 per cent throughout the summer."

Falling oil prices should eventually feed into lower petrol prices, although this may not be felt in the official inflation figures until next month, Mr Page added.

Philip Shaw, Investec's chief economist, said that the coalition's controversial trebling of tuition fees from the autumn would also keep up the inflation pressure.

Minutes of the Bank's latest policy meeting, where it decided to draw a halt to its quantitative easing (QE) programme to stimulate growth, will also be scoured by experts next week, with a split decision anticipated. The Monetary Policy Committee member David Miles is expected to have voted for more money printing, while fellow member Adam Posen has signalled that he is ready to rejoin the QE camp next month after over-estimating the strength of the UK's recovery earlier this year.

Mr Page said the Bank could be keeping back QE as a "shot in the locker" for any intensification of the eurozone crisis, as well as being reluctant to offer more stimulus against a backdrop of rising inflation.

PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Finance Assistant - Part time - 9 month FTC

£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...

Marketing Manager

£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...

Market Risk Manager - Investment Banking - Mandarin Speaker

£45,000 - £65,000: Saxton Leigh: Our client is a well-known APAC Corporate and...

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Day In a Page

Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

A Syrian general speaks

A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities
‘A bit of a shock...’ Cambridge economist with Glasgow roots becomes Zambia’s acting President

‘A bit of a shock...’ Economist with Glasgow roots becomes Zambia’s acting President

Guy Scott's predecessor, Michael Sata, died in a London hospital this week after a lengthy illness
Fall of the Berlin Wall: History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War

Fall of the Berlin Wall

History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War
How to turn your mobile phone into easy money

Turn your mobile phone into easy money

There are 90 million unused mobiles in the UK, which would be worth £7bn if we cashed them in, says David Crookes
Independent writers remember their Saturday jobs:

Independent writers remember their Saturday jobs

"I have never regarded anything I have done in "the media" as a proper job"
Lyricist Richard Thomas shares his 11-step recipe for creating a hit West End musical

11-step recipe for creating a West End hit

Richard Thomas, the lyricist behind the Jerry Springer and Anna Nicole Smith operas, explains how Bob Dylan, 'Breaking Bad' and even Noam Chomsky inspired his songbook for the new musical 'Made in Dagenham'
Tonke Dragt's The Letter for the King has finally been translated into English ... 50 years on

Buried treasure: The Letter for the King

The coming-of-age tale about a boy and his mission to save a mythical kingdom has sold a million copies since it was written by an eccentric Dutchwoman in 1962. Yet until last year, no one had read it in English
Can instilling a sense of entrepreneurship in pupils have a positive effect on their learning?

The school that means business

Richard Garner heads to Lancashire, where developing the 'dragons' of the future is also helping one community academy to achieve its educational goals
10 best tablets

The world in your pocket: 10 best tablets

They’re thin, they’re light, you can use them for work on the move or keeping entertained
Lutz Pfannenstiel: The goalkeeper who gave up Bayern Munich for the Crazy Gang, Bradford and a whirlwind trawl across continents

Lutz Pfannenstiel interview

The goalkeeper who gave up Bayern Munich for the Crazy Gang, Bradford and a whirlwind trawl across continents
Pete Jenson: Popular Jürgen Klopp can reignite Borussia Dortmund’s season with visit to Bayern Munich

Pete Jenson's a Different League

Popular Klopp can reignite Dortmund’s season with visit to Bayern
John Cantlie video proves that Isis expects victory in Kobani

Cantlie video proves that Isis expects victory in Kobani

The use of the British hostage demonstrates once again the militants' skill and originality in conducting a propaganda war, says Patrick Cockburn
The killer instinct: The man who helps students spot potential murderers

The killer instinct

Phil Chalmers travels the US warning students how to spot possible future murderers, but can his contentious methods really stop the bloodshed?
Clothing the gap: A new exhibition celebrates women who stood apart from the fashion herd

Clothing the gap

A new exhibition celebrates women who stood apart from the fashion herd
Fall of the Berlin Wall: Goodbye to all that - the lost world beyond the Iron Curtain

The Fall of the Berlin Wall

Goodbye to all that - the lost world beyond the Iron Curtain