LONDON, June 13 (Xinhua) -- Britain's inflation continued its recent upward trajectory, reaching 2.9 percent in May, according to figures released by the Office of National Statistics Tuesday.
CPI inflation rose from 2.7 percent in April, above the 2 percent target that the central bank, Bank of England (BOE), aims for and is now at its highest level in four years, showed the figures.
Amit Kara, head of UK macroeconomic forecasting at National Institute for Economic and Social Research (NIESR) said: "We expect inflation to rise further over the course of this year and to reach a peak in the final quarter of 2017."
"This spike in inflation will exert further downward pressure on real household disposable income, at a time when wage growth remains modest, and in turn squeeze consumer spending."
The BOE will hold its Monetary Policy Committee (MPC) meeting on Thursday, where it will consider changes in the bank rate, currently at a record low of 0.25 percent.
"Although inflation has surprised the BOE on the upside, we expect the MPC to look through this temporary spike in inflation and hold monetary policy stable until mid-2019," said Kara.
Paul Hollingsworth, UK economist at Capital Economics, told Xinhua that he thought CPI inflation is now not far away from its peak.
"The rise in inflation from 2.7 percent in April to 2.9 percent in May, its highest since June 2013, was above the consensus expectation of 2.7 percent and the MPC's forecast of 2.6 percent. Although fuel prices fell in May, putting downward pressure on the headline rate, this was offset by rises in a number of other categories, computer games and package holidays in particular," he said.
Hollingsworth said that the rise in price pressures at the start of the supply chain was slowing. Producer input price inflation fell from 15.6 percent in April to 11.6 percent, while output prices held steady at 3.6 percent.
"This supports our view that the drop in the pound has fed through faster than expected, rather than by a larger amount. As a result, while we think that CPI inflation will peak at a little above 3 percent before the end of this year, it is likely to drop back fairly quickly in 2018," said Hollingsworth.
A single purchase
