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The UK's inflation rate is expected to be slower than that of the euro zone and the US for the first time in more than two years, as lower consumer energy prices have reduced headline inflation.
Annual consumer price growth is expected to fall to 2.1% in April, when official figures are released on Wednesday, according to forecasters compiled by Reuters, ahead of the Bank of England's 2% target. Close to. This figure is expected to be significantly lower than March's 3.2%.
Economists said the decline was mainly due to a 12% cut in household utility bill caps last month, as wholesale gas prices fell.
If this forecast is correct, April will be the second month in a row that UK inflation has been below US consumer price inflation, and the first time since March 2022 that UK inflation has been below both US and Eurozone inflation. This will be the first time.
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The Office for National Statistics figures will fuel further debate among BoE policymakers about when to cut interest rates from a 16-year high of 5.25%. Financial markets are pricing in the first rate cut in August, but some officials are pushing for a rate cut as early as the June meeting.
Paul Dales, chief UK economist at Capital Economics, said: “The global trend of the past two years will be reversed, with UK inflation lower than the US and the euro area.” “This inflation forecast supports our view that banks will cut rates before the US.” [Federal Reserve] —Maybe in June, but if not in August. ”
Inflation is expected to decline after this month's figures showed the UK economy had recovered from the recession in the first quarter of last year, posting a two-year high of 0.6% growth.・It will be a tailwind for Prime Minister Sunak.
But the slowdown in price growth has not yet reduced the country's consistent 20-point poll lead over Labor and the Conservatives. Consumer prices across the UK are still up 22% since March 2021.
Inflation rates are 2.4% in the euro area and 3.4% in the United States. UK inflation will remain lower than the US for the rest of the year as a resilient US economy threatens inflation and the Fed delays its first interest rate cut, according to Consensus Economics, a firm that aggregates averages of leading economists. He predicts that. Economists expect the European Central Bank to force its first rate cut in June.
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Inflation and labor market data will be factors that influence the central bank's interest rate decisions. The central bank wants to keep inflation at 2% on a sustained basis, rather than temporarily reaching its target.
Bank of England Governor Andrew Bailey said after the central bank's Monetary Policy Committee meeting in May that the key question was whether higher wages were being passed on to consumers, and said the latest data showed “that possibility.” “There is a tendency to suggest that.” t”.
