UK inflation fell below 10% for the first time since August

UK inflation data paints a picture of the UK economy.

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LONDON UK inflation fell sharply in April as energy prices retreated and the impact of Russia’s invasion of Ukraine began to be factored out of annual consumer price comparisons.

Headline CPI inflation rose 8.7% year over year, the National Statistical Office said Wednesday.

“Electricity and gas prices contributed 1.42 percentage points to the annual decline in inflation in April, but this component still contributed 1.01 percentage points to annual inflation,” the ONS said in a report.

“Food and non-alcoholic beverage prices continued to rise in April, contributing to higher annual inflation, but the annual inflation rate for food and non-alcoholic beverages eased from 19.2% through March 2023 to 19.1% in March 2023. until April”

However, the ONS still has the second-highest annual inflation rate for food and non-alcoholic beverages in more than 45 years, according to illustrative model estimates.

On a monthly basis, consumer prices rose 1.2%, above the consensus estimate of 0.8%.

The consumer price index, including the cost of owning a home (CPIH), rose 7.8% in the 12 months to April 2023, down from 8.9% in March, while core CPI (excluding prices of volatile energy, food, alcohol and tobacco) rose 6.8% I did. It will affect the Bank of England at a % increase from 6.2% in March.

Inflation in the UK remains stubbornly high despite the economy defying recession expectations, which has led the Bank of England to raise rates to 4.5% for the 12th year in a row at their last meeting earlier this month.

Economists expect further hikes at the next meeting, as inflation remains tighter in the UK than in comparable major economies, while the labor market remains tight and Governor Andrew Bailey warned of rising wages.

On Tuesday, Bailey admitted to lawmakers that there are “very big lessons to be learned” from the bank’s failure to predict the intensity and persistence of inflation.

Workers in various sectors have launched massive strike action in recent months amid disputes over pay and conditions as UK households continue to battle high food and energy rates.

Right direction, but ‘long way to go’

UK Treasury Secretary Jeremy Hunt told the BBC on Wednesday that the headline rate cut was “good news” but there was something beneath the figures that showed the fight was still far off. from above.”

“We have a long way to go,” he added.

Suren Thiru, director of economics at the Institute of Chartered Accountants in England and Wales, says a return to single-digit headline rates suggests the UK has “turned a corner” in the fight against inflation. said.

He expects a bigger drop over the summer as UK energy regulator Ofgem is expected to lower rates from July by cutting energy price caps.

“Chilling job market, rising taxes and dampening customer demand from rising interest rates could mean that inflation falls more quickly than the Bank of England expected,” he said.

“April’s drop in inflation is large enough for the Monetary Policy Board to keep rates on hold next month, but continuing to risk excessive tightening could exacerbate the cost-of-living crisis and business pressure.”

Quilter Cheviot’s fixed and head of research, Richard Carter, also said Wednesday that the fall shows things are going “in the right direction” but that there is “an incredibly long way to go” as inflation remains “tearful”. High.”

However, Carter suggested that there would be no such sharp decline in the coming months, especially if the IMF’s latest forecasts of the UK’s economic resilience were accurate.

“While the Bank of England has not promised that the rate hike cycle is nearing its end, we will be relieved that inflation has finally picked up,” Carter said.

“As long as wages continue to rise, the central bank will firmly put the option of further rate hikes on the table, especially if core inflation remains consistently high.”

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