UK Inflation Slows Less Than Expected To 2.3%

(RTTNews) - UK consumer prices rose more than expected in April due to the stickiness of services inflation, which would possibly delay the timing of the first interest rate cut.

Consumer prices rose 2.3 percent on a yearly basis in April, slower than the 3.2 percent increase in March, the Office for National Statistics reported Wednesday.

The April inflation was the weakest since July 2021, when it was 2.0 percent. However, the rate was stronger than economists' forecast of 2.1 percent.

Core inflation that excludes energy, food, alcohol and tobacco, softened to 3.9 percent from 4.2 percent in March, but remained above the 3.6 percent forecast.

In response to the smaller-than-expected fall in inflation, the Bank of England will first cut interest rates in August rather than in June, Capital Economics economist Paul Dales said.

"And the data cast some doubt over an August rate cut too," said Dales.

Today's data supports the view that the first rate cut will come in August, which offers the BoE an extra inflation print to be more confident about the underlying trend, ING economist James Smith said. Services inflation eased only slightly in April, to 6.0 percent from 5.9 percent in March. At the same time, goods prices declined 0.8 percent, offsetting prior month's 0.8 percent increase.

The ONS said falling gas and electricity prices resulted in the largest downward contributions to the change in the CPI annual rates.

Meanwhile, upward contribution came from motor fuels, with price rising this year but falling in the same period last year.

Month-on-month, the consumer price index posted a 0.3 percent increase after rising 0.6 percent a month ago. Economists had expected a 0.2 percent gain.

Another report from the ONS showed that output price inflation in April was the highest since May 2023, while input prices declined for the eleventh consecutive month. Output prices moved up 1.1 percent annually after a 0.7 percent gain in March. Monthly inflation remained unchanged at 0.2 percent. Input prices registered an annual fall of 1.6 percent following a 2.5 percent drop in March. The monthly input PPI inflation rate was 0.6 percent in April, following a revised 0.2 percent fall in March.