Autumn Statement 2016: Inflation
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Inflation in Britain rose at the fastest pace since September 2013 in April, remaining above the Bank of England's 2% target for the third consecutive month, after breaking through the threshold for the first time in three years in March.

According to data released by the Office for National Statistics (ONS) on Tuesday (16 May), inflation as measured by the Consumer Price Index (CPI) rose to 2.7% year-on-year last month, compared with the 2.3% reading recorded in March and analysts' forecast for a 2.6% reading.

The ONS added air fares were the main contributors to the increase in inflation, largely due to Easter falling later than last year, while rising prices for clothing, vehicle excise duty and electricity also contributed to the increase.

Higher prices across those categories, however, were partly mitigated by a fall in motor fuel prices between March and April, which had instead risen between the same two months a year ago.

On a monthly basis, inflation rose 0.5% last month, compared with a 0.4% increase recorded in the previous month, which analysts expected would remain unchanged.

Meanwhile, core CPI, which measures the change in prices for retail goods and services, including food and gas, rose sharply, climbing to 2.4% from 1.8% in the corresponding period last year.

"We do think inflation would still continue to ascent before it peaks and that could be towards the end of this year," said Naeem Aslam, chief market analyst at Think Markets UK.

"The strength in the sterling may actually have some impact on the headline numbers but nothing meaningful. We do expect the bank of England of to remain completely focus on inflation number and Brexit situation."

Howard Archer, chief UK and European economist at IHS Markit, added: "We suspect the Bank of England will end up remaining tolerant on the inflation overshoot given likely limited UK growth and the prolonged, highly uncertain outlook that the UK economy will face as the government negotiates the exit from the EU.

"We suspect that UK GDP growth will be weaker than the Bank of England expects and that second round inflationary effects will remain limited with pay growth muted."

Last week, the BoE said it expects inflation will be higher than previously expected, peaking at 2.8% this autumn.

Data released tomorrow is expected to show that wage growth has slowed down to 2.1% in the past three months, meaning households could see their spending budgets squeezed even further.