Britain inflation rate picks up, price outlook remains mild

Though the British inflation rate picked up in April due to the holidays, experts reckon that the price outlook will remain mild for the next few years. Britain's consumer prices index (CPI) rose to 1.8 percent in April 2014, up from the five-year low of 1.6 percent in March, the Office for National Statistics (ONS) said Tuesday. The largest contribution to the increase in the rate come from transport costs, principally air fares, sea fares and motor fuels. An overall fall in the price of food was the largest offsetting factor, said ONS. CPIH, an inflation gauge including consumer prices and housing costs, increased 1.6 percent in the year to April 2014, up from 1.5 percent a month earlier. "The rise in British consumer price inflation in April should not be seen as a sign that the economic recovery is causing underlying price pressures to build," said Samuel Tombs, British economist at Capital Economics, in an analysis piece. Instead, it almost entirely reflects the impact of Easter, which fell in April this year but in March last year, noted Tombs. "The trend in CPI inflation should still be down over the course of the rest of 2014 thanks to the recent stability of commodity prices, sharp falls in import prices and the intensification of competition between supermarkets and retailers," said Tombs. The London-based economic research company maintains its forecast that the inflation rate will ease to as low as 1 percent by the end of this year and stay comfortably below the 2 percent target in 2015. In its latest quarterly inflation report released last week, the Bank of England said inflation in Britain is projected to remain at or slightly below the 2 percent target over the next few years. Martin Beck, senior economic adviser to the EY ITEM also said in a note: "Looking ahead, we expect inflation to stabilize around its current level or even drop a little." "The effect of the pound's climb on already dampening import costs should be increasingly reflected in consumer prices over the next few months, countering any upward pressure on inflation from the economic recovery," Beck said.