United Kingdom: Inflation ticks down again in April

Consumer prices rose 0.4% in April over the previous month, up from March’s 0.1% increase. April’s figure was driven in part by higher prices for health, transport and restaurants and hotels.

Inflation dipped to 2.4% in April from 2.5% in March, the lowest level in over a year and marking the third consecutive monthly decline. The figure undershot analysts’ expectations of 2.5% and was underpinned by lower air fares. As a result, inflation moved closer to the BoE’s 2.0% target. Meanwhile, annual average inflation remained steady from a month earlier at 2.8%. The pound lost value after the figures were released, with the market wagering that an imminent rate hike by the Bank of England is now less likely.

UK Inflation Forecast

The Bank of England downgraded its inflation forecasts in May’s Inflation Report, and now sees inflation dipping to 2.2% in Q4 2018 and 2.1% in Q4 2019, from 2.4% and 2.2% respectively in February’s Report. Last month, FocusEconomics Consensus Forecast panelists expected inflation to average 2.5% in 2018 and 2.1% in 2019. A new Forecast will be published on 29 May.