UK Inflation, as measured by the Consumer Price Index (CPI), is now at its lowest level in 13 months having fallen to 2.4 per cent, according to latest statistics by the Office for National Statistics (ONS).
Experts had expected the CPI figure to remain at 2.5 per cent but due to an early Easter air fares have dropped.
This is good news for UK consumers as spending power will increase slightly and average wages rise above inflation.
CPI rate over 5 years
Source: Office for National Statistics
However, there are concerns over a weak sterling and rising oil prices.
Kevin Doran, chief investment officer at AJ Bell said: “The recent weakness in the pound and the rising oil price are a concern and could quickly reverse the drop in inflation.
“The jump in the oil price has started to hit petrol pumps, pushing up costs for UK consumers and businesses alike. In addition, the weak pound will be driving up input costs for many UK companies which will ultimately filter through to UK consumers in the coming months.”
Nevertheless, Royal London Asset Management’s economist Ian Kernohan still expects inflation to hit its 2 per cent target by the end of the year despite the rising oil price, providing a boost to real income growth.
Although the pound has continued to slide, there has been little else in the way of market reaction to the news.
Chris Payne, managing director at GWM Investment Management said: “There has been very little immediate market reaction to CPI inflation coming in at 2.4 per cent and this is a reflection of general inflationary cooling in recent months.
“Indeed these are the most relaxed inflationary pressures in more than three years and is partly why UK rates have not picked up as quickly as predicted and sterling continues to slide.”