There’s uncertainty over whether the latest inflation figure - showing an annualised drop from 10.1 per cent last month to 8.7 per cent now - will be enough to stop future interest rate rises.
Prominent business analyst Sarah Coles, from consultancy Hargreaves Lansdown, believes a further increase in Bank of England base rate is still likely. She says: “The jury is out over how far and how fast inflation will fall, and there are still concerns that wage rises will feed higher prices. However, the Bank of England thinks inflation will drop from here, and will be closer to 5% by the end of 2023.
“The Bank of England knew this was coming, and why, so it’s not going to get over-excited at the prospect of falling inflation. It’s also likely to have an eye on core Consumer Price Index - which actually rose from 6.2 to 6.8 per cent, the highest it has been since 1992. The fact this is on the way up is likely to fuel expectations of a rate rise when the Bank meets next month.”
Nicholas Hyett, an investment analyst at the wealth management service Wealth Club, feels the same: “The energy shock may be fading, but month-on-month inflation is higher in April than it has been at any time since last October as communication, transport, alcohol, tobacco and food prices continue to rise.
“Core inflation, the kind of price rises that are created by the UK domestically, rather than forced upon the country by global energy and food prices, is at the highest it’s been in over 20 years … [the] numbers probably strengthens the case for higher interest rates at the next Bank of England meeting, and that means the pain will continue for consumers and businesses alike.”
Mortgage brokers, however, are broadly more optimistic on the impact of the data.
“The fact that it is no longer in double digits is likely to be enough to halt the seemingly endless hammer blow of interest rate rises … The next [Bank of England] Monetary Policy Committee meeting may see a pause in rates but this data perhaps pushes any hopes of rate cuts a little further down the line" suggests Wes Wilkes, chief executive of Net-Worth Ntwrk, a wealth management service.
Samuel Mather-Holgate of Mather & Murray Financial says: “There will be more, significant falls to come. The Bank of England are ultra cautious on inflation though, and won’t start moving on rates until we are near target, so probably not until September.”
And Graham Cox, founder of the SelfEmployedMortgageHub, adds: “Further Bank of England base rate increases are hopefully less likely, which could see Sterling come off its recent gains against the Dollar and Euro."