The war between Russia and Ukraine – major producers of food and energy – has disrupted global production, trade and distribution in these areas, leading to price rises.
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UK inflation eased to 2.3% in April, the Office for National Statistics said on Wednesday, close to the Bank of England’s target rate even if it missed expectations.
The headline reading was down from 3.2% in March, but economists polled by Reuters had expected a steeper drop to 2.1%.
Core inflation excluding energy, food, alcohol and tobacco eased to 3.9% in April from 4.2% in March.
Investors are watching the print with interest after BOE policymakers signaled they are ready to cut interest rates in the summer, but stressed that timing will depend on new data.
Services inflation, a key measure monitored by the BOE, eased slightly to 5.9% from 6% – missing the Bank of England’s 5.5% forecast.
The British pound traded higher against both the US dollar and the euro, up 0.3% following the print.
Paul Dales, chief UK economist at Capital Economics, said the inflation data “makes a June rate cut possible and also casts some doubt on August”.
That’s because of particularly high services numbers, Dales said in a note, which “suggests that the persistence of domestic inflation is fading more slowly than the BOE assumed.”
“Inflation is back to where it should be,” UK Prime Minister Rishi Sunak said on social media site X.
Sunak’s ruling conservative party is hoping for signs of an improving economic climate as it lags behind. Surveys Ahead of the national elections due by the end of January 2025. The UK economy emerged from a shallow recession, registering 0.6% growth in the first quarter of the year.
BOE Governor Andrew Bailey has insisted that the central bank will remain politically independent in deciding the timing of the next rate cut, regardless of the upcoming election.
