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News : UK Economy Last Updated: Apr 12, 2011 - 5:32 PM

UK inflation rate falls to 4% in March
By Finfacts Team
Apr 12, 2011 - 3:48 PM

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Source: ONS

The UK Consumer Prices Index (CPI) annual rate of inflation fell to 4%, down from 4.4% in February.

The decline was mainly triggered by a record monthly fall in the price of food and non-alcoholic drinks, which dipped 1.4%, compared with a rise last year. Retail Prices Index (RPI) inflation - - which includes mortgage interest payments - - dipped to 5.3% from 5.5% in February.

The fall eases pressure on the Bank of England to raise interest rates.

The Office for National Statistics (ONS) said supermarkets had reduced their prices in March.

The British Retail Consortium (BRC) also said increased competition at a time when consumers were spending less meant margins were being squeezed.

A record 40% of supermarket sales were discounted or part of a promotional offer, it added.

The ONS said the CPI rose by 0.3% between February and March this year compared with a rise of 0.6% a year ago. The 0.3% increase this year is within the normal range for a February to March movement though the 0.6% in 2010 was a record. Between 1996 and 2009, the 1-month change between February and March varied between increases of 0.2% and 0.5%.

The most significant upward contributions to the 1-month change in the CPI between February and March 2011 came from:

  • transport: prices, overall, rose by 1.2% between February and March. The largest upward effects came from fuels and lubricants where pump prices rose by 2.7% to reach record levels of £1.32 for petrol and £1.38 for diesel. There were also upward effects from air transport and the purchase of second-hand cars;

  • furniture, household equipment and maintenance: the largest upward effect came from furniture and furnishings where prices rose by 3.7%.

The most significant downward contribution to the 1-month change in the CPI between February and March 2011 came from:

  • food and non-alcoholic beverages: prices, overall, fell by 1.4%, the largest ever fall for a February to March period. The downward effects were widespread with the most significant coming from fruit, and bread and cereals. Fruit prices, overall, fell by 4.7%, a record for a February to March period. Bread and cereal prices, overall, fell by 2.6%, the largest ever monthly fall.

UK Inflation, a ‘Temporary Blip’: Economist

“I’m still pretty confident we’ll get to nearly 5% year-on-year inflation later this year,” Alan Clarke, UK economist at BNP Paribas, told CNBC. “I think it is temporary,” he added, “given the earlier indications we’ve got, we’re probably going to accelerate again next month”:

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