UK inflation could be about to drop below the Bank of England target

A shopper selects fresh produce from a market stall in the Kingston district of London, UK, on Monday, May 20, 2024. 

Bloomberg | Bloomberg | Getty Images

LONDON — U.K. inflation could be about to hit a major milestone, with some forecasting that a sharp fall in the April print will take the headline rate below the Bank of England’s 2% target.

That would represent a plunge from the current level of 3.2% and could “make or break” a June interest rate cut, economists say.

The decline will largely be driven by the energy market, after the regulator-set cap on household electricity and gas bills came down by 12% at the start of April.

A reading below 2% on Wednesday would be the lowest headline inflation rate since April 2021, and a cooling from the peak of 11.1% hit in October 2022 — when U.K. price rises were among the most severe of all developed economies.

The country has been hit by a range of inflationary pressures, including a persistently tight labor market, weakness in the currency increasing the cost of imports, and steeper rises in gas bills than were seen elsewhere.


The UK has 'probably the most convincing disinflation story,' economist says

BOE Deputy Governor Ben Broadbent said in a Monday speech that if inflation continues to move in line with forecasts, it is “possible Bank Rate could be cut some time over the summer.”

As of Tuesday, money market pricing continued to indicate only around a 50% probability of a June cut, rising to 73% in August.

Market overreaction?

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