Inflation fell by more than expected in Wednesday's figures - but some economists warn we are not out of the woods yet
Inflation fell by more than expected in Wednesday's figures - but some economists warn we are not out of the woods yetto 3.4 per cent in February with economists expecting it to fall further this spring – but many believe it will then rise again later in 2024.
The Centre for Economics and Business Research expects inflation to hit 1.8 per cent in June, before a sharp upward increase to 2.6 per cent in the third quarter of the year.Deutsche Bank Research has said it expects inflation to hit 1.7 per cent on average between April and June. It then expects the rate to rise to 1.9 per cent in the third quarter of the year, and stay at this level until the end of 2024.Capital Economics for example thinks inflation will hit 1.
Sanjay Raja of Deutsche Bank Research explained: “The big reason for the ‘rebound’ in headline inflation is due to base effects from the large fall in energy prices we saw last year. We also expect core goods prices to see some modest pick-up, due to a tightening of supply chains as a result of Red Sea tensions.”
Cameron Misson of CEBR said: “The broader downward trend in inflation can be attributed to factors such as a softening labour market, and easing food prices.”Interest rates tend to go down when inflation falls. Higher rates are used as a tool to subdue spending, in the hope this makes price increases slow down.
“We need to see more evidence that inflation is set to fall all the way to the 2 per cent target, and stay there, before we can lower interest rates,” he said in February.
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