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Britain’s inflation rate fell to 2.3% in April, the Office for Statistics said on Wednesday, falling short of expectations but closer to the Bank of England’s target rate.
The composite index fell from 3.2 percent in March, but economists surveyed by Reuters had expected a sharper drop to 2.1 percent.
Core inflation, which excludes energy, food, alcohol and tobacco, fell to 3.9% in April from 4.2% in March.
Investors are closely following the news after BOE policymakers indicated they intend to cut interest rates this summer, but stressed the timing will depend on the latest data.
Services inflation, a key indicator tracked by the BOE, fell only slightly from 6% to 5.9%, also below the Bank of England’s 5.5% forecast.
The British pound rose following the news, rising 0.3% against both the US dollar and the euro.
Paul Dales, chief UK economist at Capital Economics, said the inflation data “makes a June rate cut less likely and casts some doubt on August as well.”
That’s due in particular to the high service sector readings, “suggesting that persistent domestic inflation is dissipating more slowly than the BoE expects,” Dales said in a note.
British Chancellor Rishi Sunak said on social platform X that “inflation is back where it should be.”
The ruling Conservative Party, led by Sunak, is pinning its hopes on signs of improvement as the economic environment lags behind. poll The UK economy emerged from a shallow recession in the first quarter of this year, posting growth of 0.6%.
BOE Governor Andrew Bailey has stressed that the central bank will remain politically independent in deciding when to cut interest rates next, regardless of the upcoming election.