Last week, the Bank of England warned that inflation as measured by the Consumer Prices Index (CPI) would peak at just below 3% this year. Despite the post-Brexit vote pickup in inflation, the Bank of England left its monetary policy and key interest rates unchanged last week, claiming that were no signs of overheating in the economy.
"As inflation begins to fall back next year as the upward pressures from the drop in the pound start to fade, we think real wages will begin to rise again", said Paul Hollingsworth from Capital Economics.
An earlier government statement claimed March data pointed to an "annual house price increase of 4.1 percent which takes the average property value in the U.K.to £215,847 ($278,000)".
The sharp jump in inflation was driven partly by this year's much later Easter, which pushed up air fares by almost 19% over the month.
In the short term, the sluggish wage growth add to fears that weaker consumer spending will see economic growth slow in coming months, given that inflation picked up to 2.7% in April and so is likely to be exerting a major squeeze on real wages.
Data released yesterday showed United Kingdom consumer price inflation picked up speed in April to hit 2.7% and many economists think it will reach 3% soon.
Though the near-term inflation outlook is very benign, Nomura expects headline CPI inflation to rise sharply to 5.5-6% in the fourth quarter of 2017 and first half of 2018, before stabilising around its steady state of around 5% in the second half of 2018.
Excluding bonuses, earnings rose by 2.1 per cent year on year, the weakest increase since July of last year and below economists' expectations.
The Statistics Department said the increase was fuelled by price rises in food sub-groups comprising Oils and Fats (39.1 per cent), Fish and Seafood (6.2 per cent) and Meat (4.2 per cent).
The core inflation rate remained stable at 2.5 percent.
The price of clothes also rose to the highest level for six years, climbing by 1.1 per cent between March and April after falling by 0.4 per cent a year ago. However, apparel, auto taxes, food prices and the weak Pound also fuelled inflation pressures.
Consumers paid 0.4 per cent more compared to February, with the biggest month-over-month increase in the fuel and power sector, in which prices rose 3.9 per cent, thanks chiefly to a 12.5 per cent increase in the fuel adjustment rate on electricity bills.