Inflation fell to its lowest level since July 2021 on the back of falling energy prices, but still came in ahead of expectations.
Prices rose 2.3 per cent in the year to April, according to the Office for National Statistics (ONS), down from 3.2 per cent in March.
The Bank of England and City economists had expected inflation to fall to 2.1 per cent
Core inflation, which strips out volatile components such as food and energy, fell to 3.9, down from 4.2 per cent previously but ahead of the 3.6 per cent expected by economists.
The figures will dent hopes that the Bank of England is on track to cut interest rates as soon as June.
At the Bank’s last meeting earlier this month, policymakers confirmed that they were considering cutting interest rates. “A change in Bank Rate in June is neither ruled out nor a fait accompli,” Andrew Bailey said.
Speaking earlier this week, Ben Broadbent, a deputy governor at the Bank, said summer interest rate cuts were “possible” if incoming data aligned with the Bank’s forecasts.
Although inflation has fallen dramatically from its peak of over 11 per cent in October 2022, rate-setters are looking for signs that persistent price pressures are decisively easing.
The Bank has identified services inflation and developments in the labour market, such as unemployment and wage growth, as crucial indicators of inflationary persistence.
Figures on the labour market, released last week, came in slightly hotter than expected, although most economists argued that it would not be enough to derail a June cut.
A key focus for policymakers going forward is the extent to which firms pass on higher labour costs to consumers. Surveys suggest firms are less able to pass on costs, which could limit the inflationary impact of higher wages.
More to follow