Markets expect the April consumer price index to increase 0.5% month-over-month following a 0.4% gain in March. Headline year-over-year CPI is expected at 2.6% with core inflation expected at 1.3%.

Julian Jessop, economist at Capital Economics, feels that for all the worries over the strength of price pressures in the UK economy, UK CPI has remained pretty well behaved over recent months.

"However, it looks very likely that inflation will increase further over the next six months, very probably breaching the 3% level that would trigger only the second ever letter from the Governor of the Bank of England to the Chancellor explaining why inflation is more than 1% above target," he said.

Jessop thinks the market consensus CPI figure of 2.6% year-over-year was hardly a disaster. "But, further increases will follow. Our current best guess is inflation will peak at around 3.3% in September before coming back down next year as energy and food effects finally start to fade," he said looking ahead.

In light of the record PPI data, Howard Archer, chief UK economist at Global Insight, expects annualized CPI to have climbed to a 12-month high of 2.7% from 2.5% in March, pushed up by rising utility bills and elevated food prices as well as unfavourable base effects.

"Furthermore, inflation retreated significantly in April 2007 which will have an impact on the April (2008) calculations," Archer said. Looking ahead, he thinks it is highly likely that consumer price inflation will reach at least 3.0% in the summer, before starting to fall back as softer growth dilutes underlying inflationary pressures.

On the Retail Price Index (RPI) front, Simon Hayes of Barclays Capital expects most of the components hitting recent pricing indexes data to have broadly the same impact on the April RPI.

"Although one must note that the alcohol and tobacco component has over double the weight in the RPI basket (at 8.6%) than in the CPI (4.2%)," he added.

This difference means the budget duty effects in April are 0.1 percentage point higher for the RPI, he explained. "Factoring in a 3.9% annual average increase in council taxes (making a +0.2 percentage points contribution) means we look for the RPI to rise 0.7% month-over-month and 3.9% year-over-year (up from 3.8% in March)," Hayes concluded.

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