ONS admits inflation blunder
Britain's beleaguered statistics agency has admitted that it overstated April's inflation figures after uncovering errors in its data.
On Thursday, the Office for National Statistics (ONS) confirmed annual inflation hit 3.4pc last month, compared to its previous calculation of 3.5pc.
Official blamed the blunder on faulty car tax data provided by the Government, as Whitehall provided the relevant numbers on Vehicle Excise Duty (VED).
However, the mishap will no doubt pile pressure on the ONS, which has been repeatedly criticised over the past year for publishing flawed data about the UK jobs market.
As well as lowing the headline rate of inflation, Thursday's correction will also take 0.1 percentage points off the retail price index, reducing that measure to 4.4pc.
This will be of significance for Rachel Reeves, the Chancellor, as a significant chunk of the Government's debt is linked to the measure.
Some economists will also breathe a sigh of relief after last month's price rises were higher than they expected.
It comes at a critical time for the economy as the Bank seeks to work out how far and how fast to cut interest rates.
Threadneedle Street's policymakers, led by Governor Andrew Bailey, try to set borrowing costs to keep inflation at or around 2pc, with their decisions are guided by data from the ONS on price rises and unemployment.
However, Mr Bailey told MPs this week that the Bank of England is now now using a much broader range of data after recent shortcomings at the ONS, which has struggled with a poor response rate post-Covid.
'It is a work in progress,' said Mr Bailey. 'I don't want to take away from the fact that the ONS is working very hard at this.
'There is a very severe health warning on every release they make. Until they introduce what they call the new transformed labour force survey (LFS), which will not be until next year, we should still regard the LFS with a great deal of caution and a big health warning.'
Loss of trust in ONS
The latest admission from the ONS startled analysts and moved financial markets, with potential repercussions for household and business finances.
Bruna Skarica, at Wall Street bank Morgan Stanley, noted the jump was far larger than anything she had thought possible.
It also fed straight into forecasts for the Bank of England's interest rate cuts.
'Today's data raises doubts on expectations for two further cuts this year,' said Gabriella Dickens, economist at AXA Investment Managers.
Critically for borrowers, those forecasts have already led to trades trimming their bets for a summer rate cut, meaning borrowing costs are likely to remain higher for longer.
The ONS was approached for comment.
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