Belfast Telegraph

UK inflation on rise as cost of food and fuel climbs

By John-Paul Ford Rojas

Negative inflation has been nothing but a "temporary phenomenon," an economist said as the measure rose to 0.1% in May.

Slides in food and fuel prices have started to ease off, meaning that the Consumer Prices Index (CPI) measure of inflation rose for the first time since October, according to data from the Office for National Statistics (ONS).

CPI had fallen to minus 0.1% in April - the first time it had been negative since 1960. The rise to a positive reading of 0.1% was in line with City expectations.

Danske Bank chief economist Angela McGowan said the increase proved that low inflation was a "temporary phenomenon", but it was still a positive for households.

"UK annual inflation is still very low due to year-on-year falls in energy and food prices," she added. "In addition, the strong pound continues to keep import prices low."

But Ms McGowan also warned that the bank expected CPI inflation to pick up "sharply" in the second half of the year, once falls in energy and food prices were no longer felt.

"We expect inflation to reach around 1% at the end of this year and around 1.7% at the end of 2016," she said.

She also claimed there was a "fair chance" the Bank of England's Monetary Policy Committee could go for a slight hike in interest rates in November, which would be the first in six years.

She added: "Relatively low core inflation, strong sterling and fiscal consolidation are all downside risks to any interest rate move this year. The consensus is for a small rise in early 2016."

And ONS statistician Philip Gooding said: "Last month CPI turned negative, mainly because of falling transport fares due to the timing of Easter. This month, that fall has been reversed. In addition, the falls in food and fuel costs have eased this month, helping to push inflation up."

Belfast Telegraph