Sticky inflation pushes UK rate cut hopes to August
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The news: UK inflation fell less than expected in April, prompting traders to pare back bets on timing for interest rate cuts.
The numbers: The Office for National Statistics announced that the Consumer Price Index rose 2.3% from one year ago, compared with the 2.1% forecast by economists.
The context: Despite bringing the Bank of England’s 2% inflation target more closely into view, the figures weren’t as strong as anticipated. Traders have all but ruled out a rate cut in June, and aren’t fully pricing in a first cut until November.
The pound rose on the news, which saw inflation decrease to its lowest level since the UK’s cost of living crisis set in three years ago. The figures prompted Prime Minister Rishi Sunak to hail the data as evidence that price growth is “back to normal” and that “brighter days are ahead.”
Goldman Sachs is now forecasting the BoE's first rate cut in August, rather than its previous forecast for the beginning of June.
The sources: Office for National Statistics, Bloomberg
