May 17, 2006	Wednesday	Rabi-us-Sani 18, 1427

LONDON, May 16: British 12-month inflation rose to 2.0 per cent in April from 1.8 per cent in March, lifted by an increase in air fares and rising domestic gas and electricity bills, official data showed Tuesday. April’s figure was in line with market expectations and matched the Bank of England’s (BoE) 2.0-per cent target set by Britain’s Labour government.

Economists said that the data would not herald an interest rate hike from the central bank any time soon.

On a month-on-month basis, the consumer price index climbed by 0.6 per cent in April compared with 0.2 per cent in March, according to a release on Tuesday from the Office for National Statistics (ONS).

The change marked the highest monthly increase since May 2001.

Overall, this is not too worrisome a report for the Bank of England, and we believe that interest rates are unlikely to rise until 2007, said Global Insight’s Howard Archer.

Last week the central bank had forecast that soaring oil prices would help push inflation above 2.0-per cent in the near-term, before dropping back to around target.

Inflation is hovering around the target but there is still little evidence that rising energy costs are ... pushing underlying inflation higher, said John Butler, economist at banking giant HSBC.

The renewed stability in economic activity may have removed the need for an imminent rate cut but the lack of inflationary pressure also implies there is little need to hike.

Earlier this month the BoE’s rate-setting Monetary Policy Committee froze the cost of borrowing in Britain at 4.50 per cent in May for the ninth month in a row against a backdrop of steady economic growth.

The ONS said Tuesday that the largest upward contribution to prices in April came from transport, as air fares on both international and domestic flights increased this year compared with falls the previous year.

That partly reflected the timing of the Easter break which fell in April this year but was in March in 2005.

Airlines charge higher ticket prices during the festive period owing to increased demand.

Significant upwards effects came also from surging energy bills.

British households are suffering from soaring domestic gas and electricity prices owing to rocketing wholesale energy costs. —AFP