Inflation in the UK has fallen further, reaching its lowest level in almost three years. It was depressed by falling gas and electricity prices. An interest rate cut by the Bank of England is within reach.
After years of soaring, inflation in Great Britain is falling noticeably, paving the way for a rate cut in the summer. Consumer prices rose by only 2.3 percent in April compared to the same month last year, after 3.2 percent in March, the ONS statistics office said. This is the lowest rate since July 2021. However, experts surveyed by Reuters had expected an even sharper decline to 2.1 percent.
The decline in inflation in April was largely due to lower residential energy prices. However, price inflation for services remained stubbornly high: at 5.9 percent, it was only slightly lower than in March at 6.0 percent. Core inflation, which excludes volatile prices for energy, food and tobacco, only fell from 4.2 percent in March to 3.9 percent in April over the year.
Two percent target within reach
With price pressure easing, the Bank of England (BoE) is moving closer to its target of an inflation rate of two percent. However, since the decline was weaker than experts had predicted, the financial markets are expecting that the central bank will not start cutting interest rates until August at the earliest.
The BoE tightened monetary policy a total of 14 times between December 2021 and August 2023, pushing the key interest rate up to a 15-year high of 5.25 percent. The tight course has helped to bring the cost of living down to a more bearable level for the British. At the end of 2022, the inflation rate was still at a 41-year high of 11.1 percent.
Conservative Prime Minister Rishi Sunak, who is expected to face an election in the autumn, spoke of normalization and a “big moment” for the British economy in view of falling inflation. The British pound gained against the dollar and the euro according to the inflation data.