Bank of England governor Mark Carney as well as virtually all economists had said the dip into deflation would be short-lived as it was largely due to exceptional events such as the oil price fall.
They have been proved right as quickly as feasibly possible, albeit only by a modest increase.
“The dramatic fall in the oil price at the end of 2014 has continued to weigh on inflation through 2015 resulting in dip into deflationary territory in April,”said Adrian Lowcock, head of investing at AXA Self Investor.
“However the fall in oil prices and the food price war are starting to work their way through and are having much less of an impact on the annual inflation figure,” he added. “Therefore the deflationary pressures in the UK appear to be receding and we expect inflation to continue to rise throughout the rest of 2015.”
“We’ve gone from deflation to inflation in the space of a month, but the change is little more than a rounding error,” said Ben Brettell, senior economist at Hargreaves Lansdown.
“Seasonal factors surrounding the timing of the Easter holiday were at work in last month’s figures – CPI inflation was pushed down by cheaper air fares relative to last year. Now those factors have dropped out of the calculation we are back where we started.”
“The overall economic picture hasn’t materially changed; inflation is being kept low by cheaper fuel and a supermarket price war pushing food costs down, but both these factors are moderating and can be expected to gradually have a lesser impact on CPI,” Brettell added.
