Falling fuel and beer prices herald rare inflation drop

Easing pain for motorists at the petrol pump and Chancellor George Osborne's Budget beer duty largesse should this week herald the first fall in inflation since last September.

The Bank of England's Consumer Prices Index inflation benchmark is expected to ease to 2.6 per cent in April from 2.8 per cent in March as a 2 per cent fall in fuel costs contrasts with price hikes a year earlier. The effect of March's 1p cut in beer duty should also feed through to figures on Tuesday, economists say.

April's better news on the inflation front may, however, be a temporary respite as student tuition fees and sterling's weakness conspire to push the cost of living higher once more.

In a television interview last night, the outgoing Bank Governor, Sir Mervyn said: "We are seeing a recovery. It's only a modest recovery, and we certainly can't be satisfied with it. We need to do more to use up the spare capacity, and to get back to a healthy, growing economy. But we are in a recovery period, I think."

Attention will also fall on whether Sir Mervyn changes his stance on calling for more money printing when minutes of the latest policy meeting are published this week. The economy grew more strongly than expected in the first three months of 2013 and the bank expects growth to accelerate to 0.5 per cent in the current quarter.