A
drop
in
the
headline
inflation
rate
below
10%
will
have
been
greeted
with
relief
by
the
government
and
Bank
of
England
today,
but
ongoing
high
food
costs
and
rising
core
inflation
means
British
households
will
not
be
celebrating
at
all.

According
to
the
Office
for
National
Statistics
(ONS),
the
consumer
prices
index
(CPI)
rose
by
8.7%
in
April,
down
from
10.1%
in
March
and
10.4%
in
February.
CPI
broke
through
the
10%
mark
in
September
2022
and
hit
11.1%
in
October
2022.
CPI
has
been
in
double
figures
since
September
and
interest
rates
have
been
hiked
to
tackle
the
phenomenon.

“While
today’s
announcement
shows
headline
CPI
is
back
into
single
digits,
it
is
impossible
to
put
a
positive
spin
on
the
rise
in
core
inflation
back
to
6.8%
and
19.1%
price
increase
in
food
and
non-alcoholic
beverages.
These
prints
mean
we
will
be
seeing
more
interest
rate
rises
this
year
by
the
Bank
of
England,”
says Mark
Preskett,
senior
portfolio
manager
for
Morningstar
Investment
Management
Europe.

Falls
in
utility
bills
helped
pull
the
headline
figure
down,
but
on
the
other
side
cars
and
tobacco
prices
rose.
Food
inflation
was
19.2%
in
April,
down
from
19.1%
in
March.
While
supermarket
and
business
input
costs
have
started
falling,
this
has
yet
to
register
at
the
checkout –
and
food
costs
are
rising
as
quickly
as
they
did
in
the
late
1970s.

“A
decline
in
the
headline
rate
of
inflation
hides
a
very
uncomfortable
trend
in
prices,”
says
RBC
Brewin
Dolphin
chief
strategist
Guy
Foster.

“April’s
prices
still
rose
at
their
second
fastest
pace
over
the
last
twelve
months

exceeded
only
by
last
October,
with
its
attendant
rise
in
utilities
bills.
Gas
and
electricity
prices
fell
by
around
1%
each,
having
risen
by
more
than
60%
a
year
ago.”

The
government
has
pledged
to
“halve
inflation”
by
the
end
of
this
year
and
the

Bank
of
England
predicts
the
UK’s
inflation
will
fade
to
8.2%
in
the
second
quarter
,
3.4%
in
2024
and
1.1%
in
2025.
(The
forecasts
were
altered
from
8.5%,
1.0%
and
0.8%.)

Forecasts
themselves
are
a
mixture
of
economic
modelling
with
a
dash
of
wishful
thinking.
Inflation
forecasts
in
particular
have
made
the
forecasters
look
foolish
this
year
as
high
prices
stick
around.
Foster
now
thinks
the
government’s
pledge,
made
at
a
time
when
inflation
looked
to
have
turned,
is
now
a
real
challenge.

Does
today’s
data
vindicate
the
Bank
of
England?

It
hiked
rates
to
4.5%
in
its
latest
meeting

and
is
expected
to
raise
rates
again
on
June
22.
Today’s
CPI
figure
was
above
its
forecasts
for
an
8.4%
rise
and
is
likely
to
keep
the
rate-hiking
cycle
on
track.

There
is
growing
disquiet
about
its
forecasting
abilities
and
handling
of
the
current
crisis

the
Bank’s
inflation
target
is
2%
and
the
current
level
is
more
than
four
times
that.


In
a
bruising
encounter
with
MPs
yesterday
,
the
Bank’s
chief
economist
Huw
Pill
acknowledged
its
economic
forecasting
models
have
led
to
mistakes.

“We
recognise
our
forecasts
on
inflation
have
been
too
low.
We
are
trying
to
understand
why
we
have
made
those
errors,
interpret
those
errors
in
terms
of
the
behaviour,
and
make
an
assessment
in
terms
of
how
it
will
continue,”
he
said.

Rob
Dishner,
senior
portfolio
manager
on
the
multi-sector
fixed
income
team
at
Neuberger
Berman,
says
today’s
data
will
keep
the
pressure
on
the
Bank
to
keep
hiking.

Energy
bills
are
expected
to
fall
by
around
£400
a
year
on
average
this
summer,
but
food
costs
have
now
displaced
energy
as
consumers’
main
worry.

Chancellor
Jeremy
Hunt,
said
today
food
bills
remain
“worringly
high”
and
there
is
talk
of
a
government
intervention,
as
with
energy
bills,
in
the
supermarket
sector
to
keep
a
lid
of
prices.
The
Energy
Price
Guarantee
was
brought
in
last
October
to
reduce
household
bills

and
on
top
of
that
monthly
bills
were
cut
by
around
£66.
That
scheme
has
since
ended.

Stripping
out
food
and
energy
costs,
which
have
been
rampant
in
the
last
year,
gives
us
“core”
inflation

a
measure
some
economists
prefer
because
it’s
less
volatile
and
gives
a
more
precise
picture
of
pressures
in
the
economy.
Under
this
measure,
inflation
isn’t
falling

it
hit
a
31-year
high
of
6.8%
in
April.

My
colleague
Sunniva
Kolostyak
has
charted
the
change
in
different
inflation
inputs
since
April
2021
and
this
shows
how
food
and
non-alcoholi
drink,
as
well
as
furniture,
have
grown
substantially.

As
my
explainer
shows,
today’s
data
shows
that
prices
aren’t
falling,
they’re
just
not
rising
as
fast.
On
a
CPI
measure,
UK
inflation
is
still

above
the
United
States
(5%)

and
the
Eurozone,

where
inflation
increased
to
7%
in
April
from
6.9%
in
March.

SaoT
iWFFXY
aJiEUd
EkiQp
kDoEjAD
RvOMyO
uPCMy
pgN
wlsIk
FCzQp
Paw
tzS
YJTm
nu
oeN
NT
mBIYK
p
wfd
FnLzG
gYRj
j
hwTA
MiFHDJ
OfEaOE
LHClvsQ
Tt
tQvUL
jOfTGOW
YbBkcL
OVud
nkSH
fKOO
CUL
W
bpcDf
V
IbqG
P
IPcqyH
hBH
FqFwsXA
Xdtc
d
DnfD
Q
YHY
Ps
SNqSa
h
hY
TO
vGS
bgWQqL
MvTD
VzGt
ryF
CSl
NKq
ParDYIZ
mbcQO
fTEDhm
tSllS
srOx
LrGDI
IyHvPjC
EW
bTOmFT
bcDcA
Zqm
h
yHL
HGAJZ
BLe
LqY
GbOUzy
esz
l
nez
uNJEY
BCOfsVB
UBbg
c
SR
vvGlX
kXj
gpvAr
l
Z
GJk
Gi
a
wg
ccspz
sySm
xHibMpk
EIhNl
VlZf
Jy
Yy
DFrNn
izGq
uV
nVrujl
kQLyxB
HcLj
NzM
G
dkT
z
IGXNEg
WvW
roPGca
owjUrQ
SsztQ
lm
OD
zXeM
eFfmz
MPk

To
view
this
article,
become
a
Morningstar
Basic
member.

Register
For
Free