Inflation Miss May Delay, But Shouldn’t Deter, BOE Rate Cut
Policymakers will get another set of consumer price data before their June meeting.
The Old Lady may be delayed in easing policy, but she shouldn’t be deterred.
Photographer: Hollie Adams/BloombergThere will be disappointment on both Downing Street and Threadneedle Street after inflation slowed to 2.3% in April. While that’s a sharp drop from 3.2% in the previous month, it’s higher than the 2.1% anticipated by economists surveyed by Bloomberg. It probably means monetary policy easing is delayed — but it shouldn’t be off the agenda.
With consumer price increases moving closer to the 2% target, the Bank of England could still cut the official interest rate from its current 16-year high of 5.25% next month, but it will be a tight decision. The crunch may be the May CPI release due on June 19, one day before the next BOE meeting, when a further improvement is expected. It’s likely to go down to the wire.
There have been 18 months of angst since inflation soared to a high of 11.1% in October 2022. The UK suffered from faster price increases than either the US and or the euro zone; now the BOE is the closest among the major central banks to declaring victory in the battle to restore price stability. But as increases in motor fuels and hospitality charges show, there are still upward pressures despite wider falls in energy and food costs.