UK inflation cools less than expected, traders lower bets on rate cut

British inflation slowed less than expected last month, fueling questions about the timing of the Bank of England starting to cut interest rates

Inflation in Britain slowed less than expected last month, fueling questions about the timing of the Bank of England starting to cut interest rates.
The British Office for National Statistics released on Wednesday that the CPI rose by 2.3% year-on-year in April. This was lower than the 3.2% increase in March. But it was higher than the 2.1% increase expected by the Bank of England and economists.
While inflation is now at its lowest level since the summer of 2021, signs of lingering price pressures may make Bank of England Governor Andrew Bailey and his colleagues even more reluctant to cut interest rates quickly.
Inflation in the services sector, which the Bank of England monitors closely, was 5.9%, little changed from 6% in March.
The core price index, which excludes volatile food and energy costs, fell to 3.9% from 4.2%.
With British inflation slowing less than expected, traders have sharply reduced their bets on interest rate cuts from the Bank of England. The market no longer expects a 100% chance of two 25 basis point interest rate cuts this year.
The market expects a 39 basis point rate cut before the end of the year – equivalent to one rate cut. The probability of a second rate cut is about 60%; on Tuesday, a 54 basis point cut was expected.

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