British inflation jumps to four-year peak

LONDON — British inflation soared close to a four-year high in May, official data showed on Tuesday, boosted by the rising cost of energy, food and recreational goods.

Consumer Price Index inflation unexpectedly hit 2.9 per cent last month, which was the highest level since June 2013 when it last stood at that level.

The reading compared with a rate of 2.7 per cent in April 2017 and overshot market expectations for no change.

Inflation had held close to zero throughout 2015 — but has surged since then as a weak Brexit-hit pound raises import costs.

"Rising prices for recreational and cultural goods and services — particularly games, toys and hobbies — was the main contributor to the increase in the rate," the Office for National Statistics said in a statement on Tuesday.

"There were smaller upward contributions from increased electricity and food prices.

"These upward contributions were partially offset by falls in motor fuel prices, and air and sea fares, the latter two influenced by the timing of Easter in April this year."

British inflation remains stubbornly above the Bank of England's (BoE) 2-per cent target.

That could raise the pressure on the central bank's rate-setting monetary policy committee when it considers a rate hike later this week.

However, the outlook remains clouded by ongoing political uncertainty in the wake of Britain's election last week — and by looming Brexit negotiations.

"Inflation continues to push higher, but political and economic uncertainty mean the BoE is likely to tread carefully," said ING economist James Knightley.

"We do not expect a BoE rate hike until there is much greater clarity on the outlook."

The outlook is heavily dependent on what sort of divorce terms Britain reaches with the European Union and whether it can secure a trade deal.