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Last Updated: Tuesday, 16 May 2006, 09:46 GMT 10:46 UK
UK inflation rises to 2% target
UK inflation rose in April following a surprise dip in March, the Office for National Statistics (ONS) said.

The Consumer Prices Index (CPI) - the official rate of inflation - rose to 2% from 1.8% in March to stay in line with the Bank of England's target figure.

Air fares were one of the biggest factors behind the rise, with more consumers holidaying over Easter.

The headline RPI rate - which includes mortgage interest payments - increased to 2.6% from 2.4% a month earlier.

Rising global crude oil prices helped drive up inflation by triggering a rise in fuel and lubricant prices.

Increasing household bills also added to the increase as gas tariff increases took effect while water and electricity prices also rose.


"It is encouraging that after such large increases in gas and electricity and petrol prices that the headline rate is only at its target," RBS economist Geoffrey Dicks said.

"The headline rate may edge higher in the coming months as higher energy prices continue to feed through but the underlying picture remains benign."

Experts added that core inflation had remained at 1.3% - kept in check, in part, by stiff competition on the High Street which helped contain any "second round" effects from higher oil prices feeding through.

"Nevertheless, it is clear that the Bank of England is now on high alert for any signs that elevated energy prices are increasingly feeding through to have significant second round effects, especially given that inflation expectations have risen recently," Global Insight economist Howard Archer added.

The latest figures have underpinned expectations that the Bank of England would be more likely to raise than lower interest rates in the long term.

Last week the Bank hinted that rate rises were on the horizon in its quarterly inflation report as rates were set to rise above its 2% target in coming months as a result of higher gas and energy bills.

However, it did add that inflation would be back on target within two years.

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