Persistent high inflation may extend possibility of BoE rate cuts

According to data published by the Office for National Statistics on Wednesday, 17 April 2024, consumer prices increased by 3.2%, which is slightly less than the recorded 3.4% in February 2024.

These records further indicated that core inflation, which does not include food, energy, or tobacco, dropped from 4.5% to 4.2%. A Reuters poll predicted 4.1% for this metric. The Bank of England (BoE) also keeps a close eye on services inflation, and the new data reflected a minimal decrease from 6.1% to 6.0%.

Food price increases eased somewhat, and analysts believe this chiefly contributed to the overall inflation decrease. In the year leading up to March 2024, food and non-alcoholic drink prices went up by 4%.

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As the BoE has an inflation target of 2% before moving to cut interest rates, investors do not believe interest rate cuts will happen in the near future. Analysts stated the decelerated drop in British inflation follows a US headline price growth, which jumped to 3.5% in March 2024 after increases for two consecutive months.

Based on Reuters information, BoE governor, Andrew Bailey, said the inflation movements in the US and Europe may delay interest rate cuts. According to the latest data, and end to the fight against inflation is not yet in sight. Reuters cited deputy chief UK economist at Capital Economics, Ruth Gregory, who said:

The chances of interest rates being cut for the first time in June are now a bit slimmer.