In the U.K., inflation eased to 3.2% from 3.4% in March, according to the Office for National Statistics. While economists had anticipated a 3.1% reading, higher-than-expected figures prompted investors to delay expectations of the first Bank of England rate cut. Food prices played a significant role in bringing down the headline rate, while motor fuels pushed it higher. The core figure, excluding certain elements, stood at 4.2%, slightly exceeding projections.
Market observers noted a shift in pricing, with many now anticipating a 25 basis point cut in interest rates in September or November instead of June. Uncertainty looms over global central banks amid signs of ongoing inflationary pressures, particularly in the U.S. Camille de Courcel of BNP Paribas highlighted the U.K.’s alignment with the U.S. direction, posing a risk to her previous prediction of a June rate cut. Despite labor data showing unexpected trends, attention remains on potential wage growth and services as key factors for the Bank of England’s Monetary Policy Committee.
Looking ahead, some experts predict a significant decline in inflation in the next month’s reading due to the impact of utility prices. Ruth Gregory of Capital Economics foresees inflation falling below the 2% target in April, suggesting that a June rate cut is still possible if inflation trends downwards. However, concerns about persistent inflation akin to the U.S. situation and geopolitical tensions in the Middle East raise potential risks. Following the announcement, the British pound rose against the U.S. dollar and euro, with Finance Minister Jeremy Hunt welcoming the inflation data as positive news.