25 May 2023 - Inflation falls, but less than expected
The latest data for inflation was published yesterday, and it showed that although headline inflation fell back into single figures, the fall was less than expected at an annual rate of 8.7% versus 10.1% previously. The market was expecting the fall to be even greater at 8.1%. This means the likelihood of the Bank of England hiking interest rates again at its next rate-setting meeting is more likely than previously expected. Core inflation, the rate with more volatile items like energy and foodstuffs stripped away, rose in April to 6.8%, up from 6.2%. This was the outcome that Andrew Bailey, the Bank’s Governor had warned about last, when the spike about a wage/price spiral, where headline inflation begins to fall, but the core is propped up by the lag in wage settlements that were negotiated while inflation was far higher and only now are coming into force, beginning. The data chimed with the IMF report published the previous day which predicted that the UK would avoid a recession this year, but that inflation would remain stubbornly high. Beyond Currency Market Commentary: Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.