UK inflation rate jumps to 1.5% – how it affects your finances
THE UK's rate of inflation jumped to 1.5% in the 12 months to April due to rising household bills, clothing prices and fuel costs.
It comes after the Office for National Statistics (ONS) said the Consumer Prices Index (CPI) hit 0.7% in March.
Meanwhile, inflation rose to 0.4% in February and to 0.7% in January.
On a monthly basis, inflation rose by 0.6% in April 2021, after a 0.3% increase in March.
The rise in inflation comes as pubs, gyms, salons and non-essential shops opened for the first time in months on April 12 following lockdown.
The hospitality industry then reopened for indoor dining on Monday, May 17.
How inflation affects your finances
INFLATION is a measure of the cost of living.
It looks at how much the price of goods, such as food or televisions, and services, such as haircuts or train tickets, has changed over time.
Usually people measure inflation by comparing the cost of things today with how much they cost a year ago. The average increase in prices is known as the inflation rate.
The government sets an inflation target of 2%.
If inflation is too high or it moves around a lot, the Bank of England says it is hard for businesses to set the right prices and for people to plan their spending.
High inflation rates also means people are having to spend more, while savings are likely to be eroded as the cost of goods is more than the interest we're earning.
Low inflation, on the other hand, means lower prices and a greater likelihood of interest rates on savings beating the inflation rate.
But if inflation is too low some people may put off spending because they expect prices to fall. And if everybody reduced their spending then companies could fail and people might lose their jobs.
See our UK inflation guide and our Is low inflation good? guide for more information.
The inflation surge also came as energy prices rose sharply, when the price cap for default tariffs was increased from April 1.
While rising oil prices saw motor fuel inflation rise at its fastest pace for more than four years.
Inflation is expected to increase this year, as the UK and other countries around the world ease their coronavirus restrictions.
The Bank of England forecast earlier this month that inflation will increase above its 2% target, to 2.4% in the final three months of 2021, largely due to energy prices.
But Governor Andrew Bailey said he expects the spike to be temporary and inflation should return to around 2% in the medium term.
ONS Chief Economist Grant Fitzner said: "Inflation rose in April, mainly due to prices rising this year compared with the falls seen at the start of the pandemic this time last year.
"This was seen most clearly in household utility bills and clothing prices.
"As the price of crude oil continues to rise, this had fed through to the cost of motor fuels, which are now at their highest since January 2020."
While Steven Cameron, pensions director at Aegon, added: "There’s now a growing realisation that high inflation could be around the corner, which reduces individual’s purchasing power and what they could buy with their savings over time.
"Keeping money in the bank typically earns interest, but if the interest rate is lower than inflation, money or purchasing power is effectively being lost.
"With interest rates at historic lows, just scraping above zero, any amount of inflation raises challenges for savers."
And Ed Monk, associate director for personal investing at Fidelity International, said: "Inflation is now closing in on the Bank of England’s 2% target and could blow past that if the demand in the economy continues to build in the coming months.
"The rise confirmed today appears to be driven by both pent-up consumer spending after more than a year of lockdown and the return of more normal pricing for fuels and other household utility costs that were disrupted last year.
"It supports the case that the savings many households have been able to make over the past year will be spent, helping a rapid recovery in overall growth."
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In February, the economy grew by 0.4% despite the country being in lockdown.
Meanwhile, the jobs market has shown early signs of recovery as unemployment fell to 4.8% between January to March this year.