UK CPI: Ofgem Caps Hawkish Expectations

April's UK CPI fell more than expected to 2.8%, driven by service inflation slowing and the Ofgem energy cap. This data suggests markets are overpricing future BoE rate hikes.

Key Takeaways

• 1.April UK CPI showed a significant cooling, with headline inflation dropping to 2.8% and core CPI to 2.5%, making the hawkish case for Bank of England hikes harder to sustain.
• 2.The Ofgem price cap and government shifts in energy costs have effectively smoothed the passthrough of energy shocks into household bills.
• 3.Market pricing for interest rate hikes in the second half of the year appears overpriced given the fading persistence of inflation in the rest of the basket.

Table of Contents

• UK CPI: OFGEM CAPS HAWKISH EXPECTATIONS
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