UK inflation eases less than expected in April, adding pressure on BoE

Inflation in Britain eased in April and fell below two-digit values for the first time since August, but missed expectations, while core inflation which excludes the most volatile components, rose well above expectations / previous month and hit the highest since 1992.

Annualized inflation rose by 8.7% in April, compared to 10.1% in March, but overshot forecast for 8.3% increase.

Closely watched core CPI, which excludes food, energy and tobacco spiked to 6.8% in April, against expectations for unchanged figure at 6.2%, warning that underlying inflation picked up again.

The latest data show that Britain has the highest inflation among G7 group and the second highest inflation rate in Europe, with no signs of substantial easing in inflationary pressure that keeps the central bank under increased pressure to further raise interest rates.

Stubbornly high inflation is a problem for the Bank of England as well as Britain’s government, as high prices hit the whole economy and particularly hurts the households.

April’s figure also warn that the promise of PM Sunak at the start of 2023 to bring inflation to around 5% by the end of the year, look quite unlikely at current circumstances, but adds to signals that the BoE would deliver another 25 basis points rate hike in June and lift borrowing cost to 4.75%.

Fresh increase of bets for another rate hike were boosted by rise of two key measures of underlying inflation – core CPI and price increase in services sector, which hit their multi-decade highs.