Today we got the April inflation read for the UK, (and a election announcement) which was expected to be lower than the previous month thanks to a substantial cut in the costs of energy to households. But in the end, UK inflation slowed by less than economists had predicted thanks to services inflation proving sticky, which prompted traders to pare their bets on when the Bank of England will cut rates. The first reduction isn’t now fully priced in until November, three months later than the prevailing expectation over the past few weeks and all but eliminating the chance of a cut in June that was in play yesterday.
Services inflation — which the BOE is watching carefully for signs of domestic pressures — remained little changed at 5.9% after a 6% reading the month before. It was a much smaller fall than the cooling to 5.5% expected by UK central bank, with strong wage growth keeping services inflation stubbornly high.
The easing in the annual inflation rates in April 2024 principally reflected price changes in the housing and household services – particularly for gas and electricity where a 12% drop in the UK’s energy price cap, a mechanism designed to protect consumers from sharp moves in natural gas and electricity costs came through.
http://www.martinnorth.com/
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