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    Inflation slows sharply to near three-year low

    A shopping basket containing groceries on February 14, 2024 in London, England. (Photo by Dan Kitwood/Getty Images)

    Britain’s annual inflation rate dropped to a near three-year low in April as energy prices cooled further, official data showed Wednesday, easing a cost-of-living crunch and stoking rate cut expectations.

    The Consumer Prices Index slowed to 2.3 per cent from 3.2 per cent in March, the Office for National Statistics revealed in a statement.

    That marked the lowest level since July 2021, when inflation had stood at 2 percent – which is also the target for the Bank of England.

    The news comes after the BoE this month signalled a summer interest rate cut, after holding borrowing costs at a 16-year peak of 5.25 percent to further dampen price rises.

    Inflation slowed rapidly last month after energy regulator Ofgem lowered the price cap on energy bills for most UK households to the lowest level for more than two years.

    “There was another large fall in annual inflation led by lower electricity and gas prices, due to the reduction in the Ofgem energy price cap,” said ONS chief economist Grant Fitzner.

    “Tobacco prices also helped pull down the rate, with no duty changes announced in the budget.

    “Meanwhile, food price inflation saw further falls over the year. These falls were partially offset by a small uptick in petrol prices.”

    Gas and electricity bills sank in April on lower wholesale energy prices, which had surged in the wake of key producer Russia’s invasion of Ukraine.

    Economists had widely expected a sharper drop in inflation, citing a 12 per cent drop in regulated household energy tariffs that took effect last month.

    “While inflation continues to fall sharply, this report will come as a disappointment to the Bank of England and investors looking for a rate cut in June,” said Luke Bartholomew, senior economist at asset manager abrdn.

    “In particular the strength of core inflation and services inflation, both of which came in a fair bit stronger than expected, will make it harder for the Bank to feel confident that underlying inflation pressure is cooling adequately.”

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