UK inflation took a downward turn in April, easing to 2.3%, according to data released by the Office for National Statistics on Wednesday. This brings the inflation rate closer to the Bank of England's target, although it fell short of expectations. Core inflation, which excludes energy, food, alcohol, and tobacco prices, also saw a decline from 4.2% in March to 3.9% in April.
Economists had anticipated a steeper drop to 2.1%, but the actual figure of 2.3% still marks a notable decrease from March's 3.2%. Investors and policymakers are closely monitoring these numbers, especially as Bank of England officials have hinted at potential interest rate cuts in the summer, pending further data analysis.
Despite the overall decline in inflation, services inflation remained high at 5.9%, only slightly down from 6% in March. This figure missed the British central bank's forecast of 5.5%. The British pound saw a modest increase following the release of the inflation data, rising 0.3% against both the U.S. dollar and the euro.
Chief UK economist at Capital Economics, Paul Dales, commented that the inflation data makes a June rate cut unlikely and raises doubts about a rate cut in August as well. The persistence of high services inflation suggests that domestic inflation is decreasing at a slower pace than previously assumed by the Bank of England. BOE Governor Andrew Bailey has emphasized the central bank's independence in deciding the timing of any rate cuts, regardless of political considerations, ahead of the upcoming national election.
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