Investing.com - Consumer price inflation (CPI) in the U.K. came in lower than forecast in April after having hit more than a one year high in the prior month, official data showed on Tuesday.
In a report, the U.K. Office for National Statistics (ONS) said the rate of consumer price inflation rose by a seasonally adjusted 0.3% last month, below forecasts for it to remain stable at the 0.5% increase seen in March, which had been the highest level since December 2014.
The ONS noted that main contributors to the decline in inflation were drops in air fares and prices for clothing vehicles and social housing rent.
“These downward pressures were partially offset by rising prices for motor fuels and for certain recreational goods and cultural services, and by food prices, which were unchanged between March and April 2016, having fallen between the same two months a year ago,” the ONS said.
Month-over-month, consumer price inflation rose 0.1% in April, also below forecasts for an advance of 0.3% and following a gain of 0.4% in the prior month.
Bank of England Governor Mark Carney will now have to write an open letter to the Chancellor of the Exchequer, George Osborne, as inflation is more than a percentage point below the central bank's target of 2.0%.
Core CPI, which excludes food, energy, alcohol, and tobacco costs rose at a seasonally adjusted rate of 1.2% last month, below forecasts that were looking for it to remain stable at the gain of 1.5% seen in March.
The retail price index increased 1.3% in April, below expectations for it to advance 1.5% and March’s reading of 1.6%.
The data also showed that the house price index rose 9.0% in April, above forecasts for a gain of 7.9% and following a 7.6% increase in March.
In an immediate reaction, the pound weakened. GBP/USD traded at 1.4479 from around 1.4494 ahead of the release of the data, while EUR/GBP was at 0.7824 from 0.7818 earlier.
Meanwhile, European stock markets traded higher. London’s FTSE 100 gained 0.90%, the Euro Stoxx 50 rose 1.04%, France's CAC 40 traded up 1.01%, while Germany's DAX advanced 0.89%.