HSBC predicts that the UK’s inflation rate will drop to 1.2 percent in June, followed by a rise later in the year.
This expected decrease is largely due to the reduction in Ofgem’s energy bill cap in April and the effect of previous high statistical comparisons fading away.
From a peak of 11.1 percent in October 2022, inflation has fallen to 3.4 percent in February, amidst interest rates maintaining a 16-year high at 5.25 percent. This has placed financial strain on both businesses and consumers.
This significant drop in inflation could lead to increased pressure on the Bank of England to lower borrowing rates to stimulate the economy.
However, HSBC cautions that ongoing wage growth and persistent inflation in the service sector might push inflation back above the Bank of England’s 2 percent target.
HSBC anticipates that inflation will stabilize around the target rate more consistently next year. They clarify that while they don’t foresee a resurgence in cost and price pressures, their forecast includes a slight rise in inflation above 2 percent later this year, following this year’s energy-driven decrease, before it aligns more sustainably with the target next year.
