UK Annual Inflation Rate Slides to 2.3% in April vs. 3.2% in March 2024

UK Consumer Price Inflation Report for April 2024

On Wednesday (May 22), UK inflation figures for April warranted investor attention amidst rising bets on a June BoE rate cut.

The UK annual inflation rate tumbled from 3.2% to 2.3%, with core inflation falling from 4.2% to 3.9%. Economists forecast annual and core inflation rates of 2.1% and 3.6%, respectively.

In April, consumer prices increased by 0.3% month-on-month after advancing by 0.6% in March. Economists expected consumer prices to rise by 0.2%.

According to the Office for National Statistics,

The Consumer Prices Index, including owner-occupier housing costs (CPIH), rose by 3.0% in the 12 months to April. (March: +3.8%).

• Gas and electricity price declines made the largest downward contribution to the CPIH annual inflation rate.
• The Core CPIH (excluding energy, food, alcohol, and tobacco) increased by 4.4% in the 12 months to April 2024. (March: 4.7%).
• The owner occupiers’ housing costs (OOH) component of CPIH advanced by 6.6% (the highest since July 1992), up from 6.3% in March.
• Alcohol and tobacco price inflation declined from 11.9% to 8.0% in April 2024.
• Prices for food and non-alcoholic beverages softened from 4.0% to 2.9% in the 12 months to April 2024.
• Recreation and culture prices eased from 5.6% to 4.6%.
• Prices for communication declined from 7.6% to 4.1%.

The Consumer Prices Index, including owner-occupier housing costs (CPIH), rose by 0.5% in April 2024 compared with a 1.2% increase in April 2023.

Bank of England Monetary Policy Implications

The hotter-than-expected inflation numbers could introduce uncertainty regarding the potential for a June Bank of England rate cut. In April, the annual inflation rate remained above the 2% target, with core inflation at 3.9% likely to be a focal point.

GBP/USD Reaction to the March UK Inflation Report

Before the UK inflation report, the GBP/USD fell to a low of $1.27034 before climbing to a high of $1.27231.

However, in response to the April inflation figures, the GBP/USD slipped to a low of $1.27091 before surging to a high of $1.27511.

On Wednesday (May 22), the GBP/USD was up 0.31% to $1.27485.

Up Next

Later in the session, existing home sales figures from the US and the FOMC Meeting Minutes will be in focus. Economists forecast existing home sales to increase by 0.5% in April after sliding by 4.3% in March.

However, the FOMC Meeting Minutes could impact market risk sentiment more. Recent FOMC member speeches signaled a higher-for-longer Fed rate path. More hawkish minutes could fuel speculation about a Fed rate hike and sink investor appetite for riskier assets.