GB: Inflation slows less quickly than expected, rates rise – 05/22/2024 at 10:19

GB: Inflation slows less quickly than expected, rates rise – 05/22/2024 at 10:19
GB: Inflation slows less quickly than expected, rates rise – 05/22/2024 at 10:19

A customer buys vegetables at Andreas delicatessen in London

Inflation in the United Kingdom slowed sharply in April year-on-year, but at a slower pace than expected, while a key sub-indicator of this statistic barely fell, lowering expectations of a fall. Bank of England (BoE) rates next month.

According to data released on Wednesday by the Office for National Statistics (ONS), consumer prices in the UK decelerated on an annual basis to 2.3% in April, the lowest level since July 2021.

Economists polled by Reuters on average forecast an even sharper slowdown, to 2.1%, after 3.2% in March, due in particular to a 12% drop in regulated energy prices in the country, entry in force last month.

Excluding energy and food, the increase in consumer prices stood at 3.9% year-on-year in April, compared to 4.2% in March. The Reuters consensus was 3.6%.

Services inflation – a key indicator of domestic price pressure for the BoE – on the other hand, was much higher than expected, while petrol prices also rose.

Even if headline inflation approaches the BoE’s 2% target, the persistence of services inflation should not reassure the central bank.

“As inflation continues to fall sharply, this report will be a disappointment for the Bank of England and investors who are expecting a rate cut in June,” comments Luke Bartholomew, economist at asset manager Abrdn.

“The strength of core inflation and services inflation, both of which have been somewhat stronger than expected, will make it more difficult for the (Central) Bank to ensure that underlying inflationary pressure calms down adequately,” he added.

Services inflation returned to 5.9% from 6.0% in March. BoE forecasts and the Reuters survey anticipated a figure of 5.5%.

On the foreign exchange market, the pound sterling gained 0.28% to 1.27455 dollars. Against the euro, the pound strengthened by 0.29% to 0.85165, at a one-month high.

In the bond sector, the yield on the ten-year British Gilt jumped by almost 10 basis points, to 4.227%, dragging in its wake that of the German Bund of the same maturity, the benchmark for the euro zone, which increased by almost three points. , at 2.532%.

British inflation figures are also weighing on equity markets in Europe, where the Stoxx 600 is down 0.32%, while the FTSE index in London is down 0.47%.

(Writing by Claude Chendjou, with Amanda Cooper, Andy Bruce and Suban Abdulla, editing by Kate Entringer)

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