Inflation in the United Kingdom (U.K.) declined to 2.3% in April, according to data from Britain’s Office for National Statistics.
Headline inflation fell dramatically from a reading of 3.2% in March of this year. It is the first time since July 2021 that inflation in the U.K. has been below 3%.
The inflation rate is now close to the Bank of England’s 2% annualized target. However, the April inflation rate of 2.3% came in hotter than economists and analysts expected.
According to a poll by the Reuters news agency, economists had expected an annualized April inflation rate of 2.1%.
As such, futures traders have pulled back their bets that the Bank of England will start to lower interest rates in June of this year.
Services inflation, a key metric that is closely watched by the British central bank, eased only slightly to 5.9% from 6% in April. Economists expected it to fall to 5.5%.
Core inflation, excluding energy, food, alcohol, and tobacco, dropped to 3.9% in April from 4.2% in March.
A big decline in headline inflation was anticipated because of a year-over-year decline in energy prices.
Money markets are now placing the probability of a June rate cut by the Bank of England at 15%, down from 50% only a few days ago.
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