UK inflation slows to 2.8% in April

The finance ministry is also ⁠pressing supermarket chains to introduce voluntary price caps on key food products in return for easing some regulations, two people ​with knowledge of the situation said on Tuesday. The key question for the BoE's interest rate-setters ⁠is whether the expected rise in headline inflation creates longer-term price pressures in the economy.

British consumer price inflation slowed to 2.8% in April ​from 3.3% in March, according to official ​figures published on Wednesday. Economists polled by ‌Reuters ​had mostly expected inflation to soften to 3.0%, in large part due to the big increases in utility and other regulated prices in April ‌last year falling out of the annual comparison.

Before the U.S.-Israeli war on Iran began on February 28, the Bank of England said inflation in Britain - the highest among the Group of Seven economies for much of the ‌last four years - was likely to be close to its 2% target in April. But the energy ‌price shock from the war prompted the BoE to increase sharply its inflation forecasts which, it says, could hit 6.2% early next year under its most inflationary scenario.

British finance minister Rachel Reeves is expected to announce on Thursday more measures to help ⁠reduce ​the cost of living, including ⁠a possible cancellation of a fuel duty increase which is due to come into effect in September. The finance ministry is also ⁠pressing supermarket chains to introduce voluntary price caps on key food products in return for easing some regulations, two people ​with knowledge of the situation said on Tuesday.

The key question for the BoE's interest rate-setters ⁠is whether the expected rise in headline inflation creates longer-term price pressures in the economy. Several have said the weak jobs market could ⁠make ​it harder for workers to demand higher pay and for businesses to pass on higher costs.

Preliminary data from the tax office published on Tuesday showed a sharp fall in people in payrolled employment and ⁠weaker pay growth. Wage settlement figures published earlier on Wednesday pointed to a slowdown in pay growth too. Financial ⁠markets on Tuesday were ⁠betting on two quarter-point interest rate rises by the BoE this year, with a chance of a third. A Reuters poll of economists published last week showed ‌most expected no ‌change in rates in 2026.

(Writing by William Schomberg; ​Editing by Sarah Young)