The office for National Statistics said on Wednesday that inflation in the United Kingdom fell to 2.3% in April, approaching the Bank of England's target rate even if it was lower than expectations, as expectations indicated a more rapid decline to 2.1% levels.
Core inflation, excluding energy, food and alcohol, also fell to 3.9% in April and was forecast to decline further from 4.2% to 3.6%.
Investors are watching the results with interest, after Bank of England policymakers indicated that they are ready to cut interest rates sometime in the summer, but stressed that the timing will depend on the new data.
So what are the expectations now for the next interest rate cut
Paul Dales, chief economist at Capital Economics, said that inflation data currently makes a June interest rate cut unlikely.
The rise in services figures suggests that the continuation of domestic inflation is fading more slowly than the Bank of England assumed.
On the other hand, traders are moving to reduce the likelihood of an interest rate cut by the Bank of England after the Consumer Price Index report in the UK, as the likelihood of a rate cut in June has significantly faded.
Prior to this report, discount pricing was approaching 50% in June, but now these odds have been reduced to only 15%, with discount pricing in August at 44%, down from 98% before the data.
At the level of 2024, the forecast was for cuts by 53% by the Bank of England, but at the moment it has become 37 basis points.
UK prime minister Rishi Sunak said on social media platform X that inflation is back to where it should be The ruling Conservative Party, led by Sunak, hopes for signs of an improving economic environment, ahead of national elections, which must be held before the end of January 2025.
However, Bank of England Governor Andrew Bailey stressed that the bank will remain politically independent in setting the timetable for the next rate cut, regardless of the upcoming elections.
