The incoming governor of the Bank of England has warned Europe it must make "sustained and significant reforms" if it is to avoid a Japanese-style lost decade caused by austerity measures.
Mark Carney, in his last speech as governor of the Bank of Canada, said Europe "can draw lessons from Japan on the dangers of half measures".
He added: "Europe remains in recession, with economic activity constrained by fiscal austerity, low confidence and tight credit conditions. Deep challenges persist in its financial system. Without sustained and significant reforms, a decade of stagnation threatens."
He described Japan's recent efforts to kick-start its economy and bring an end to a decade of deflation as a "bold policy experiment". The initiatives, dubbed Abenomics after the prime minister, Shinzo Abe, involve monetary and fiscal measures, including a huge money-printing exercise.
Carney was speaking shortly after UK data showed inflation had fallen more than expected last month, potentially giving him more room to shore up the economy with a new round of quantitative easing – electronic money printing – should the recovery falter.
It was the first drop in the consumer prices measure of inflation (CPI) since last autumn, down to 2.4% in April from 2.8% in March. The softening was driven by lower fuel costs and airfares as the oil price fell, the Office for National Statistics (ONS) said.
The only real upward effect on the headline inflation number was a rise in food prices after damage to crops over the long winter. Food prices were up 4.6% on a year ago and within that vegetable price inflation was at a four-year high of 9.9%.
Economists had forecast CPI to come in at 2.6% for April and said the softer outcome would ease some of the immediate pressure on Carney when he takes the helm at the BoE in July. But most predicted inflation would pick up again over the summer.
"The bottom line is this is not the start of a collapse. A lot of the fall is temporary. However, it probably does spare Mark Carney the bother of writing to the chancellor to explain why inflation is above 3% within his first month in office," said Alan Clarke at Scotiabank in London.
Inflation has been above the Bank's government-set target of 2% for more than three years and rose as high as 5.2% in autumn 2011. Tuesday's data showed the first drop in the rate since last September but economists and the BoE predicts it will tick higher again, partly as the downward effect of a period of falling fuel prices comes to an end. Between March and April this year, petrol and diesel prices both fell – by 2.1p and 3.9p a litre respectively – compared with rises of 3.2p and 2.1p a year earlier.
Samuel Tombs at Capital Economics said: "Inflation still looks set to climb again in the coming months as we reach the anniversary of a period of falling petrol prices and deep discounting on the high street. However, the peak, probably in June, could now be closer to 3% than the 3.5% we had expected beforehand. What's more, underlying price pressures still look subdued."
The ONS said core inflation, which strips out the erratic components of food and energy, fell to 2%, the lowest rate since autumn 2009.
The retail prices index, which includes mortgage payments, fell from 3.3% to 2.9%. Separate ONS data showed factory gate inflation, which measures prices charged by producers, was the slowest since autumn 2009.
The government welcomed the drop in headline inflation. "This is good news for families and businesses. Inflation is down by more than a half from its peak," the Treasury said in a statement.
But critics of the government's austerity drive noted price rises were still outstripping average pay growth of 0.8%, leaving many households struggling to cover basic costs such as food and energy bills.
Labour's shadow treasury minister Cathy Jamieson commented: "On top of stagnant wages, rising food prices and soaring energy bills, the average family is £891 worse off this year because of tax and benefit changes since 2010."
The TUC calculates that workers are £43 a week worse off in real terms compared with three years ago. TUC general secretary Frances O'Grady said: "Average pay packets have fallen by nearly 10% over the last three years – eroding the spending power of households and eating away at the value of savings for those families still fortunate enough to have them.
"Unless we start to see real wages increase, consumer spending will remain weak and the economy will continue to struggle."
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