Economists see the latest U.K. inflation print, out Wednesday, taking the headline rate near or even below the Bank of England's 2% target.Markets remain divided on the chance of a June interest rate cut, and the level of services inflation may be key.
The decline will largely be driven by the energy market, after the regulator-set cap on household electricity and gas bills came down by 12% at the start of April.A reading below 2% on Wednesday would be the lowest headline inflation rate since April 2021, and a cooling from the peak of 11.1% hit in October 2022 — when U.K. price rises wereAshley Webb, U.K. economist at Capital Economics, said that if the headline rate does fall below 2% in April, as he expects, it would be"momentous.
BOE Governor Andrew Bailey said the latest figures were"encouraging," but that releases ahead of its June 20 meeting, including two consumer price index prints and two sets of wage growth data, would be crucial. As of Tuesday, money market pricing continued to indicate only around a 50% probability of a June cut, rising to 73% in August.Economists at ING see inflation coming in"within a whisker" of 2% in April, but dipping below it in May and staying there for most of the remainder of the year. That is well below the BOE's own forecast for the rate to be closer to 3% at the end of the year.