UK inflation eases, no June rate cut expected

UK inflation fell less than anticipated, causing investors to reduce their expectations for a Bank of England (BoE) rate cut next month, as reported by Reuters on Wednesday.

The annual consumer price rise was 2.3 per cent, a significant decrease from March’s 3.2 per cent, but still above the BoE’s 2 per cent, target. The BoE and economists had predicted a larger drop to 2.1 per cent.

Services inflation, a crucial measure of domestically generated price pressure, was higher than expected, and petrol prices also increased. Following the data release, the sterling rose, and the likelihood of a BoE rate cut in June dropped to 18 per cent, from 50 per cent,.

Economists had forecasted a steeper inflation drop, citing a 12 per cent, decrease in regulated household energy tariffs implemented last month.

However, the strength of core inflation and services inflation, which only slightly decreased to 5.9 per cent, from 6.0 per cent, in March, may challenge the BoE’s confidence in cooling underlying inflation pressure.