UK consumer price inflation jumped to a three-and-a-half-year high of 2.7% in April, furthering the squeeze on British households as prices rose faster than annual average earnings growth.
The rise in CPI, from 2.3% in March – which was unchanged from February – takes the rate of inflation further above the Bank of England's 2% target.
Analysts said a major contributing factor to the sharp rise was likely the late Easter – also a key element behind the unchanged reading in March.
In its Quarterly Inflation Report last week, the Bank of England (BoE) raised its forecasts for UK inflation. The central bank said it expected CPI to peak at 2.8% in the fourth quarter.
At the same time, however, the BoE said it did not believe inflation was being underpinned by strong growth and it revised lower its projections for annual gross domestic product over the next three years.
Expectations for near-term interest rate increases remained muted, therefore, and the pound fell following the inflation data, down 0.2% against the dollar at $1.2877 and off 0.7% to €1.1671 versus the euro.
"The fact that sterling fell against the euro in the aftermath of the announcement shows that a stagnant rate environment is well priced in," said Richard Berry at BerryFX.