24 May 2023
If you’re covering the latest UK inflation data reporting CPI at 8.7% for April 2023, please see comments below from Richard Carter, head of fixed interest research at Quilter Cheviot:
“UK inflation has finally fallen from its stubborn double-digit highs for the first time since August 2022, with a significant drop to 8.7% in April down from 10.1% in March. This downward shift was largely due the stabilisation of energy prices, while food prices are beginning to moderate.
“The latest figures come as the International Monetary Fund (IMF) backtracked on its previous estimation that the UK would be the worst performing economy in the G7, instead concluding that it will achieve 0.4% growth in 2023 and will manage to avoid a recession. The IMF’s change of heart was largely as a result of unexpected resilience in demand, with continued government support and falling energy costs each playing a part, though it still predicts inflation will be sticky and does not expect a return to its 2% target for a further three years.
“While this fall in inflation shows things are beginning to move in the right direction, we cannot ignore the fact that there is an incredibly long way to go. Inflation at 8.7% is still eye-wateringly high with prices rising steeply, and we are unlikely to see such significant eases as this in the coming months. Instead, we can expect to see a more gradual decline, particularly if the IMF’s prediction is accurate.
“While the Bank of England has made no promises that it is nearing the end of its hiking cycle as far as interest rates are concerned, it will be relieved to see inflation has finally budged. For as long as wage growth continues to increase, the Bank will keep the option of further interest rate rises firmly on the table – and particularly if core inflation remains persistently high.”
