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Inflation turns corner and could force interest rate rethink

Author: ICAEW Insights

Published: 24 May 2023

Official data reveals that UK inflation moved back into single digits in April, but food inflation remains near record high.

The inflation figures released on Wednesday 24 May 2023 by the Office for National Statistics (ONS) reported that the Consumer Prices Index (CPI) rose by 8.7% in the 12 months to April 2023, the lowest rate since March 2022 and down from 10.1% in March 2023. On a monthly basis, UK CPI inflation rose by 1.2% in April, down from 2.5% in April 2022. 

While UK inflation has now slowed in five out of the last six months, it remains well above the Bank of England’s 2% target. Core inflation – which strips out volatile items such as food, energy, alcohol, and tobacco – stood at 6.8% in the year to April, the highest rate since March 1992 and up from 6.2% in March.

The slowdown in March was mainly driven by the continued fall in fuel prices. The annual inflation rate for housing, water, electricity, gas and other fuels was 12.3% in April, down from a peak of 26.7% in January 2023 and from a rise of 26.1% in March. This fall was mostly driven by the favourable annual comparison with April 2022 when the Ofgem energy cap rose by 54%. Monthly gas prices fell by 1.0% between March and April this year, compared with a rise of 66.8% between the same two months a year ago. This was the first time since October 2020 that monthly gas prices had fallen. 

In contrast, food and non-alcoholic beverage prices saw a monthly increase of 1.4% in April compared with a rise of 1.5% in the equivalent time period last year and an annual rise of 19.1% in April 2023 compared with an annual rise of 19.2% in March 2023. The annual rate for this category is currently the second highest since August 1977.

Responding to the latest UK inflation figures, Suren Thiru, Economies Director for ICAEW, said: “While still staggering, the return to single digit inflation suggests the UK has turned a corner in its fight against soaring prices after lower energy bills pulled down the headline rate.

“This will be the first of the big falls in inflation this year, with the headline rate set to fall sharply over the summer once the expected reduction in Ofgem’s energy price cap drives down energy bills from July.

“The drag on customer demand from a cooling jobs market, higher taxes and the lagged impact of rising interest rates may mean that inflation falls more quickly than the Bank of England has forecast.

“April’s decline in inflation is large enough for the Monetary Policy Committee to keep interest rates on hold next month, but if they continue to risk overtightening, it could worsen the cost-of-living crisis and the squeeze on businesses.”

For further information, read the ONS Consumer price inflation


A closer look at the impact of inflation on people, businesses, accountancy and the wider economy, bringing together the best expert opinion, data and analysis from ICAEW and its members.

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