British inflation slowed to its lowest level in about three years last month, approaching the Bank of England’s 2% target.
Consumer prices rose 2.3% year-on-year in April, lower than the 3.2% increase in March The National Bureau of Statistics said Wednesday. The rate cut was slightly less than economists expected and was the lowest since July 2021.
it was pulled down Lowering the cap on home energy costs Food inflation also slowed to 2.9% from 4%.
Headline inflation has fallen sharply, bringing it closer to the central bank’s target, marking a new phase in British policymakers’ battle against inflation. Central bankers, who have sharply raised interest rates after pandemic lockdowns caused prices to soar and energy markets roiled after Russia invaded Ukraine, are trying to determine how much inflationary pressure is left in the economy and how soon they can cut rates.
This is a challenge shared by other major central banks. Eurozone policymakers have signaled rate cuts That could come as soon as this summer, and in the United States, inflation remains relatively high.
The Bank of England expects inflation to fall to 2.1% this month before rebounding slightly and hovering around 2.5% for the rest of the year. But policymakers are keeping a close eye on service prices and wage growth, two traditionally stubborn components of inflation, which remain uncomfortably strong at just under 6% annually.
Policymakers said rate cuts could begin in a few months as long as inflation remains broadly in line with their latest forecasts. two members of the interest rate setting committee Already voted for cuts.
On Tuesday, Kristalina Georgieva, managing director of the International Monetary Fund, said the institution had “some good news for the UK” as it concluded its annual review of the UK economy. “.
Passed by a Unexpectedly strong exit from recession At the beginning of this year, the International Monetary Fund raised its forecast for UK economic growth this year to 0.7% from 0.5% a month ago. The International Monetary Fund predicts that the UK economic growth rate will be 1.5% in 2025, interest rates will fall, and wage growth will exceed the inflation rate.
Georgieva told a news conference in London that actions taken by the British government and the Bank of England “coupled with favorable energy price developments are bearing fruit”. “The economy is growing, inflation is coming down, and a soft landing is coming,” she said, referring to a situation in which inflation slows but does not slip into a painful recession.
The fund expects UK inflation to make a “durable return” to target in early 2025 and recommends cutting interest rates from 5.25% to 4.75% or 4.5% this year and a further 1 percentage point next year.
But the longer-term outlook for the UK economy is bleaker. The fund said weak labour productivity and the number of people dropping out of the job market due to long-term health problems were weighing on the outlook.
The IMF also warned that British officials may need to make difficult choices to stabilize public debt due to requirements for increased public spending and investment. Although the ruling Conservative Party has said it is ambitious, it has recommended against further tax cuts “as a general principle”. further tax cuts Ahead of the general election due within the next eight months.
