Inflation falls to lowest level since March last year

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Inflation

Inflation in April fell to the lowest level in 13 months despite surging fuel costs and record price rises on soft drinks after the sugar tax came was implemented.

Figures from the Office for National Statistics (ONS) show the Consumer Price Index (CPI) fell to 2.4 per cent last month, down from 2.5 per cent in March.

April’s CPI is also the lowest recorded since March 2017.

Economists had been expecting inflation to stay steady at 2.5 per cent.

The government’s sugar tax came into effect on April 6, pushing up soft drink prices by 2.8 per cent month-on-month and 6.2 per cent year-on-year, according to the ONS.

However, many retailers have not passed on the cost of the tax to consumers yet, while some had increased prices in advance.

Air fares had downwards pressure on inflation in April due to the early timing of Easter, with fares dropping 7.9 per cent year-on-year and by 0.2 per cent between March and April.

However, clothing prices climbed 1.7 per cent year-on-year, and overall food prices rose 2.3 per cent year-on-year.

“Inflation continued to slow in April, with air fares making the biggest downward contribution, due to the timing of Easter. This was partially offset by the rise in petrol prices,” ONS head of inflation Mike Hardie said.

“Soft drink prices saw their biggest ever rise for this time of year, due to the introduction of the sugar tax. However, many retailers still haven’t passed the impact of the tax on to shoppers.”

The inflation update prompted the pound to slide 0.6 per cent against the US dollar to $1.33.

Against the euro, the pound was down 0.1 at €1.14.

Meanwhile, the Bank of England decided to hold rates at 0.5 per cent in May, backing away from an expected hike after a sharp slowdown in growth at the start of the year.

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