U.K. annual inflation slowed more-than-expected in April relieving the central bank governor from writing an open letter to the chancellor explaining why inflation exceeded the limit.
Consumer price inflation fell to 3 percent from 3.5 percent in March, data from the Office for National Statistics showed Tuesday.
The timing of Easter this year helped to reduce inflation. Nonetheless, the figure continues to stay above the 2 percent target.
The annual inflation rate was last lower in December 2009, when it was 2.9 percent. Today's rate equaled 3 percent inflation in February 2010.
Moreover, April inflation was slightly below the expected rate of 3.1 percent. Falling inflation provides more freedom to the Bank of England to adjust its quantitative easing, if economy weakens further.
If inflation remains one percentage point above the 2 percent for three straight months, the remit requires Bank of England Governor to write a letter to the chancellor explaining why inflation exceeded the target and steps taken to bring it down.
Data showed that monthly inflation doubled to 0.6 percent in April, in line with forecast, from 0.3 percent in the previous month.
Core inflation, that excludes volatile alcohol, food, tobacco and energy prices, also eased in April to 2.1 percent from 2.5 percent in March.
Retail price inflation, a measure used in wage negotiations, eased marginally to 3.5 percent from 3.6 percent in March. The annual rate was last lower in December 2009. However, April's figure was slightly above the expected 3.4 percent.
Excluding mortgage interest payments, retail prices rose by 3.5 percent from a year ago, slower than the 3.7 percent rise in March.
In the latest Inflation Report, the Bank of England said inflation is set to remain above the 2 percent target for the next year or so.
Vicky Redwood at Capital Economics said central bank's forecast is pessimistic. The economist sees inflation to be below the target before this year is out.
IHS Global Insight's Chief UK Economist Howard Archer expects inflation to fall to around 2.3 percent at the end of 2012.
The central bank halted its quantitative easing at GBP 325 billion early this month. Today, the International Monetary Fund urged U.K. policymakers to consider further monetary easing via QE and possibly cutting the policy rate.
The IMF said the uncertainty about inflation dynamics and the strength of disinflationary pressure coming from the output gap imply risks that inflation could take longer-than-expected to return to target.
by RTT Staff Writer
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