The Weekly Brief
Thought of the week
The substantial drop in headline inflation is welcome news for policymakers, but the upside surprise relative to expectations will certainly dampen the mood at the Bank of England. Given changes to the energy price cap in April 2022, it was well understood that the contribution from energy would fall this month. Services inflation gives a much better read on underlying price pressures and the signs here were far more concerning with services prices seeing a very strong 1.6% month on month uptick. While the subsequent announcement of a lower-thanexpected energy price cap is a welcome surprise, core inflation is running at its fastest monthly rate since the 1990s. Absent a remarkable turnaround in incoming data interest rates are likely to rise by a further 0.25% points in June.
Pressure is still mounting on the Bank of England
UK headline inflation breakdown, % change year on year