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UK Inflation Drops Under 10% for First Time since August 2022
As per the latest reports, the UK inflation has taken fresh dive under 10% for the last month of April 2023. This happened as the energy price retreated and the impact of Russia’s invasion of Ukraine started to subside on the annual consumer price comparison.
Earlier on Wednesday, May 24, the Office for National Statistics said that the headline CPI inflation came in at 8.7% year-on-year. This was a substantial drop from 10.1% in March. However, it was still above the consensus estimates of 8.2% as polled by Reuters economists. In its report, the Office for National Statistics (ONS) said:
“Electricity and gas prices contributed 1.42 percentage points to the fall in annual inflation in April as last April’s rise dropped out of the annual comparison, but this component still contributed 1.01 percentage points to annual inflation. Food and non-alcoholic beverage prices continued to rise in April and contributed to high annual inflation, however, the annual inflation rate of food and non-alcoholic beverages eased, from 19.2% in the year to March 2023, to 19.1% in the year to April 2023.”
Also, on a monthly basis, consumer prices rose by 1.2%, above the consensus estimate of 0.8%. For the 12 months period to April 2023, the Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 7.8%. Also, the core CPI jumped to 6.8%, up from 6.2% in March. this will be a major point of concern for the British central bank.
As we know, British inflation has been stubborn forcing the Bank of England to continue its interest rate hikes to 4.5%, for the 12th consecutive time. Economists are expecting further hikes in the upcoming meetings as inflation in the UK remains sticky in comparison to other major economies.
BoE to Continue Its Fight Against Inflation
With inflation sticky and the labor market tight, Bank of England Governor Andrew Bailey recently warned about a wage-price spiral. On Tuesday, Bailey admitted to the bank’s failure to properly forecast the strength of inflation.
Commenting on the recent development, British Finance Minister Jeremy Hunt said that the falling headline rate was “welcome news”, but that there are “things underneath those numbers which show that this battle is far from over”.
Hunt added that we have a “long way to go”. Economists expect the headline inflation rate to drop further in the summer in the UK. energy regulator Ofgem is likely to reduce its energy price cap, driving down bills from July onwards. Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said:
“April’s decline in inflation is large enough for the Monetary Policy Committee to keep interest rates on hold next month, but if they continue to risk overtightening, it could worsen the cost-of-living crisis and the squeeze on businesses.”
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UK Inflation Drops Under 10% for First Time since August 2022
