That’s more than double the 0.7 per cent registered in March.
Meanwhile the consumer prices index including owner occupiers’ housing costs (CPIH) rose from 1 per cent to 1.6 per cent over the month.
According to the ONS, the big drivers in this jump were energy bills, off the back of the rise in the energy price cap, and transport costs which rose to their highest contribution level in two years.
Don’t hit the panic button yet
Laith Khalaf, financial analyst at AJ Bell, said that much of the inflation of the last year could be explained away by oil prices rising from an “exceptionally low” $20 a barrel to today’s price of $70 a barrel, and that as the global economy opens up there is the potential for further rises as demand picks up further.
He continued: “The UK is still way behind the US, where the latest inflation reading came in at 4.2 per cent, and CPI inflation is still below the Bank of England’s 2 per cent target. The Bank has made it clear that it will tolerate inflation rising modestly above target, without pulling the trigger on interest rate rises.
“If realised, a sustained inflationary period would be a paradigm shift from the last twenty-five years of extremely benign price rises, which have provided comforting mood music for stocks and bonds. Investors don’t need to hit the panic button just yet, but they do need to factor the potential for higher rates of inflation into their plans. Where inflation is concerned, it’s better safe than sorry.”
No logic to saving in cash
Kevin Brown, savings specialist at Scottish Friendly, noted that the markets were understandably nervy about the potential impact of a significant rise in inflation, and noted that such a rise would also pose a threat to everyday savers.
He continued: “The reality of low interest rates and rising inflation means it’s not logical to save in cash for the long-term as you’re effectively committing yourself to losses.
“One way to hedge against rising inflation would be to diversify your money into multiple assets. This might seem like a big step for those people that are new to investing but it can be done easily through a stocks and shares ISA and will give you the potential to generate above-inflation returns.”
