UK inflation slides to 2.3%

Inflation fell sharply to a near three-year low in April thanks largely to lower energy prices, according to the Office for National Statistics.

UK inflation has fallen sharply to its lowest level in nearly three years.

According to the Office for National Statistics (ONS), consumer price index (CPI) inflation fell to 2.3% in April from 3.2% in March.

Cooler energy prices were a major factor in the decline. Inflation is now at its lowest since July 2021, when it was last at the Bank of England’s 2% target.

Today’s CPI inflation figures are, however, slightly higher than expected, with economists polled by Reuters having anticipated a drop to 2.1%.

With core CPI inflation, which excludes energy, food, alcohol and tobacco prices, reducing to just 3.9% from 4.2% in March, economists do not now expect the Bank of England to cut interest rates next month.

ONS chief economist Grant Fitzner said: ‘There was another large fall in annual inflation led by lower electricity and gas prices due to the reduction in the Ofgem energy price cap.’

Quilter Investors investment strategist Lindsay James said the news puts the UK on course for its first rate cut in four years, even if it may not come in June.

‘Investors will cheer the fact headline inflation has come back close to target once more,’ James said.

‘Historic data shows that in the absence of a recession, investment returns are strongest in the year after the first rate cut, so there will be lots of anticipation as the UK appears to turn the economic corner.’

Neil Birrell, chief investment officer at Premier Miton Investors, said UK inflation is not falling as fast as the Bank of England wanted, meaning the first-rate cut will be pushed back.

‘The service sector has proved to be the sticking point and it will remain the bank’s focus over the next month or two, ahead of a potential rate cut in the summer,’ Birrell said.

Dylan Lobo (CityWire)

Retirement Professionals UK inflation slides to 2.3%