UK inflation falls less than expected to 2.3% on interest rate warning – live

According to the latest inflation figures, no one will be better off, the Liberal Democrats said.

Reacting to the latest inflation figures, Lib-Dem Treasury spokeswoman Sarah Olney said: “No one will be feeling better after today as families still face a £9 billion mortgage bomb this year alone.”

“Conservative ministers cannot celebrate today after being responsible for the worst cost of living crisis in a generation.

“The repercussions of this crisis will be felt for years to come and the blame clearly lies with this incompetent government.

“The Conservative Party should never again be trusted to manage the UK economy.”

The latest inflation data paves the way for interest rate cuts in the coming months, the Confederation of British Industry (CBI) said.

CBI senior economist Alpesh Paleja said: “Given Ofgem’s 12 per cent cut in the energy price cap, inflation was always expected to fall sharply in April.” Households and businesses will welcome a more favorable inflation environment, but it is worth noting that many continue to struggle with high price levels, particularly for food and energy bills.

“Today’s data creates further conditions for rate cuts in the coming months. While the Monetary Policy Committee is likely to cut interest rates over the summer, it is still waiting for more definitive declines in measures of domestic price pressures.

“It is encouraging that wage growth is now slightly below the Bank of England forecast, but there is still a long way to go before it moves towards levels consistent with target inflation.”

“The bank will also be mindful of growing upside risks to inflation in the near term: as domestic growth prospects improve and tensions in the Middle East threaten to inflame commodity prices and supply pressures globally.”

The weaker-than-expected decline in inflation could prompt the Bank of England to tread cautiously in cutting interest rates, a think tank has said.

Paula Bejarano Carbo, economist at NIESR, said: “Inflation has fallen to its lowest level in almost three years. This is positive news, however inflation remains above the Bank of England’s 2 per cent target and core inflation is still higher than its historical average at 3.9 per cent.”

“Coupled with last week’s strong wage growth data, we believe elevated inflation in the services sector will continue to pose an increased risk to inflationary pressures in the second half of this year.

“As a result, the MPC may exercise caution at its upcoming meeting and maintain interest rates despite today’s encouraging fall in the policy rate.”

The fall in inflation to close to the Bank of England’s 2 percent target is “good news” but wages are still catching up with post-pandemic price increases, a think tank said.

Carsten Jung, senior economist at IPPR, said: “Inflation temporarily falling close to the Bank of England’s target is good news, but wages are still catching up as prices have risen following the pandemic. That’s why it’s important that the Bank doesn’t hamper Britain’s nascent recovery by keeping interest rates too high for too long.

“The bank has tightened the screws too much and that will slow the economy and wage growth in the future. They recently admitted that inflation is falling faster than previously thought, pointing to an earlier policy reversal.

“Looking back, it is clear that the government could have done more to protect people from inflation. Other countries, such as France and Japan, have been more proactive in easing price increases and doing more to prevent companies from stoking inflation by shielding their profits. There is still a need for action, especially when it comes to profits.”

The cost of living crisis is “not over – no matter how much ministers claim it is,” a union has said.

“Prices are still rising. Food and energy bills are much higher than they were a few years ago. And many are suffering from rapidly increasing mortgage repayments,” said TUC General Secretary Paul Nowak.

“While it is good that inflation is lower, millions of people across the country are still going without essentials as they struggle to make ends meet.

“This is because household budgets have been decimated by the highest price increases in the G7 countries and wages have stagnated over the past 14 years.

“Pay packages are still worth less today than they were in 2008, as working people are on course to make this Parliament poorer than when it started.

“Make no mistake – the Tories have experienced the worst living standards in generations.”

Rachel Reeves welcomed the fall in inflation but warned that now was not the time for a “victory lap”.

“Inflation has fallen but now is not the time for Conservative ministers to pop the champagne corks and take a victory lap,” the Shadow Chancellor said.

“After fourteen years of conservative chaos, families are worse off. Prices in stores have skyrocketed, mortgage bills have risen and taxes are at their highest level in seventy years.

“Rishi Sunak is now putting the family finances at risk again with his £46 billion unfunded policy to abolish National Insurance, which would mean more borrowing, higher taxes or the end of the state pension as we know it.”

“It’s time for change. Labour’s first steps will deliver economic stability so we can grow our economy and keep taxes, inflation and mortgages as low as possible.”

Today’s fall in inflation is a “big moment” for the economy, Rishi Sunak said.

“This is proof that the plan is working and that the difficult decisions we have made are paying off,” the Prime Minister said.

“Better days lie ahead, but only if we stick to the plan to improve economic security and opportunity for all.”

The consumer price index inflation rate fell to 2.3% in April from 3.2% in March, the Office for National Statistics said.

Pantheon Macroeconomics expects services inflation to fall from 6 percent in March to 5.4 percent in April.

Luke Bartholomew, senior economist at Abrdn, said service sector inflation is likely to be more important to Bank of England policymakers than the headline inflation figure.

“While the return of inflation to target is psychologically significant and symbolic of the great progress made since inflation peaked above 11%, it is unlikely to be the figure most closely watched by the Bank of England and investors,” he said.

“If services inflation meets expectations, a rate cut in June remains in play.

“But a big positive surprise will likely see the market scale back its bets on a rate cut in June and eye the start of the easing cycle in August.”

The British economy is set for a “soft landing” as it grows faster than expected following last year’s recession, according to the International Monetary Fund (IMF).

However, the global financial agency stressed that ambitious structural reforms to improve living standards were “urgently needed” ahead of parliamentary elections later this year.

It also warned against tax cuts ahead of the election, pointing out that the government could raise more funds from taxes related to carbon consumption or road vehicles.

The IMF said in a new report on the health of the UK economy that the country’s GDP (gross domestic product) is expected to grow by 0.7% in 2024, following growth of 0.6% in the first quarter.

This represents an improvement over the IMF’s previous forecast, which was for growth of 0.5% for the year.