Proactive Investors - The Bank of England is now expected to cut interest rates once this year, after inflation data showed prices rose quicker than expected last month.
According to XTB analyst Kathleen Brooks, chances for a second rate cut this year are still high, though this is now far from being set in stone.
“The interest rate futures market has pushed out its expected timing of Bank of England rate cuts,” she commented, with reductions in August or September now uncertain.
“Currently the market is pricing in one full rate cut, and a high chance of a second, although a second-rate cut is not guaranteed,” she added.
ONS data on Wednesday showed the consumer price index rose by 3.2% in March, the slowest annual pace in over two years, but slightly ahead of market expectations for 3.1%.
Slowing food price rises offered the largest downward contribution, as motor fuels dealt the most upward pressure.
EY ITEM Club reassured that a June rate could still be on the cards though, arguing price rises were set to slow drastically this month.
“The 12% cut to Ofgem’s price cap will mean the downside effect from energy prices will grow,” analysts said.
“Services inflation is also likely to fall back as lower headline inflation should mean April’s annual indexation of inflation-linked contracts and regulated prices results in much smaller price rises than last year.”