U.K. headline inflation decelerates sharply in April, likely to remain below 1 pct in near-term

U.K. headline inflation slowed down sharply in the month of April. On a year-on-year basis, the consumer price inflation decelerated to 0.8 percent in April from March’s 1.5 percent, the lowest level since August 2016. The outturn was modestly lower than median expectation of 0.9 percent and largely reflected the effect of lower energy prices. Nearly 8 percent fall in was recorded petrol/diesel prices throughout the month, while a further fall in Ofgem’s energy price cap took effect from the 1st April, lowering the cost of standard variable energy tariffs.

Excluding energy, prices were more stable with food and drink inflation unchanged in April at 1.3 percent year-on-year, while the ‘core’ rate of inflation, eased modestly to 1.4 percent year-on-year from 1.6 percent.

Clothing prices dropped 1.5 percent last month, as compared with a rise of 0.3 percent recorded in April 2019. These effects make interpreting the inflation figures more difficult, noted Lloyds Bank in a research report.

“However, undoubtedly the near-term outlook is consistent with inflation remaining below 1 percent for some time. Ultimately, the balance between demand and supply will be key to the longer-term outlook for inflation, over which there remains a great deal of uncertainty at present”, added Lloyds Bank.