On 22 May 2024, the Office for National Statistics (ONS) announced that UK Consumer Prices Index (CPI) inflation fell to 2.3% in the 12 months to April 2024.
This is its lowest level since July 2021, and far below the high of 11.1% reached in October 2022.
The ONS identified lower electricity and gas prices as the main factor in the reduction, which was partly offset by a rise in the cost of motor fuel.
Although this is a significant drop from the previous figure of 3.2% in the 12 months to March, it is slightly higher than the 2.1% many analysts had predicted. This casts some doubt on how soon the Bank of England (BoE) will reduce the base rate, which it has held steady at 5.25% for nearly 10 months, with the aim of reducing inflation to the Bank’s target rate of 2% per annum.
In its recent annual report, the International Monetary Fund (IMF) gave a relatively upbeat view of the UK economy, but warned the BoE against the danger of keeping interest rates high for too long, which could stall the UK’s recovery.
The IMF recommended a rate reduction between a half and three quarters of 1% in 2024.
There was some expectation that the first cut might come as early as the BoE’s next base rate review in June, but the latest inflation figures may lead to any reduction being delayed until August.
Hartey Wealth Management is based in Chester and Oswestry, and offers a range of financial advice across Cheshire and Shropshire.
