Inflation falls back to 3.2%, Bank of England governor talks about prospect of interest rate cut

The Governor of the Bank of England signaled that Britain will still cut interest rates as official data showed that the pace of economic price growth slowed further.

Andrew Bailey spoke just hours before the Office for National Statistics (ONS) revealed its Consumer Price Index (CPI) measure. inflation Growth slowed to 3.2% in the 12 months to March, the lowest level in two and a half years.

That was lower than the 3.4% measured last month but slightly higher than economists expected.

Grant Fitzner, chief economist at the Office for National Statistics, said of the changes seen last month: “Food prices were once again the main cause of falls, with price rises lower than a year ago.

“Similar to last month, we saw higher fuel prices partially offset the impact.”

Lower inflation is welcome for long-suffering households whose spending power has been reduced Wages are rising faster than prices.

Further impetus is expected to come from bank of england This month’s sharp fall in CPI is widely seen as becoming the main inflation gauge for the central bank’s 2% inflation target as energy-driven inflation continues to ease in the coming months.

Some economists expect the central bank to begin withdrawing anti-inflation drugs in June.

Cutting interest rates from the current level of 5.25 per cent would cut many of the borrowing costs that add to strains on personal finances, such as rising mortgage rates.

Mr Bailey told an International Monetary Fund event in Washington: “In the UK we are experiencing deflation, what I would call general deflation.”
employment.

“I see, you know, there’s strong evidence now that this process is well underway.

“Our judgment on rates is ‘how much do we need to see now to feel confident about rates [disinflation] process’. “

But there is growing consensus that the central bank may have to delay cutting interest rates.

LSEG data shows that most financial market participants now expect a first interest rate cut in August or even September.

Concerns include the threat of rising oil costs as conflicts in the Middle East continue to unfold, and the fact that UK wage growth is now almost twice the rate of inflation.

The other one is from the United States.

There, central bankers warned that the likelihood of imminent interest rate cuts had faded as the world’s largest economy overheated.

The question for the Bank of England following Jay Powell’s speech on Tuesday is that a rate cut in the UK ahead of the Fed could weaken the value of the pound against the dollar.

This will raise the dollar-denominated cost of imports of key commodities, such as most including oil, and stoke inflation.

Mr Bailey admitted: “Inflation dynamics are quite different now between Europe… and the US.

“I think demand-led inflation in the U.S. is worse than what we’re seeing,” he added.