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UK Inflation drops to 8.7%

ended 24. May 2023

The latest inflation data is just out. It shows inflation rose by 8.7% in the 12 months to April 2023, down from 10.1% in March. On a monthly basis, CPI rose by 1.2% in April 2023, compared with a rise of 2.5% in April 2022. Please answer any or all of the Qs below:

  • How could this impact the base rate at the next MPC meeting?
  • What does this mean for borrowers and the property market?
  • What does it mean for savers?
  • How could it impact Sterling and the markets?
  • What does it mean for the UK economy?

Any other thoughts, send them across ASAP as this story is BREAKING.

10 responses from the Newspage community

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Wes Wilkes
CEO at IronMarket Wealth
While inflation didn't come down as much as expected by the Bank of England and economists, the fact that it is no longer in double digits is likely to be enough to halt the seemingly endless hammer blow of interest rate rises. We must be aware, however, that this does not mean prices are falling, but that they are simply not going up by as much. This drop in inflation can be attributed mainly to the sharp slowdown in gas and electricity prices that rose by such eye-watering amounts this time last year. There is a concern that 'core' inflation, which excludes food and energy, ticked up higher at 6.8% from 6.2%. However, the next Monetary Policy Committee meeting may see a pause in rates but this data perhaps pushes any hopes of rate cuts a little further down the line.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Finally we are seeing some good news, and this will be most welcome by those involved or invested in the property market. There will be more, significant falls to come. The Bank of England are ultra cautious on inflation though, and won’t start moving on rates until we are near target, so probably not until September. Finally, we are heading in the right direction though.
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Riz Malik
Independent Financial Adviser at R3 Wealth
The drop in UK inflation from 10.1% to 8.7% is a promising sign, potentially preventing further Bank of England rate hikes. This drop in inflation, if continued, could offer borrowers relief, support the property market and likely foster a positive reaction in both sentiment and the markets. The UK needed some good news and this certainly is it."
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Justin Moy
Managing Director at EHF Mortgages
This is what the country has been waiting for! Great news, that is a sizeable reduction in the rate, and that will hopefully be enough for the MPC to defer any further increases in the base rate this month. Prices as a whole are still increasing way above the ideal target rate of 2%, but we all want to feel some positivity in the economy and this announcement will give us all some hope!
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Rohit Kohli
Director at The Mortgage Stop
The latest inflation data shows a decrease, but it's essential to remember this still represents a rise in prices, perpetuating the cost of living crisis. Although the drop is less than economists predicted, it's a positive sign. From a mortgage perspective, the Bank of England could hold the base rate at their next meeting, awaiting the further impact of easing energy prices on inflation. This could provide some relief to borrowers, potentially keeping mortgage costs steady in the short term. However, the high inflation rate continues to pressurise the property market. For savers, the ongoing high inflation erodes real returns, reinforcing the need for strategic financial planning. Sterling and markets could experience mixed reactions given the drop wasn't as high as expected. Lastly, while a decline in inflation is beneficial for the UK economy, the current rate is still high and not really a cause for celebration or a result of any real government interventions.
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John Choong
Senior Equity Research Analyst at Investing Reviews
While today's inflation number finally dropped below double digits, it still came in above the consensus of 8.2%. More alarmingly, core CPI ticked up to its highest level since 1992, as services spending isn't expected to cool anytime soon. This was spurred by strong rises in recreation & culture and communication. This now leaves Andrew Bailey with no other choice than to continue hiking rates in the MPC's coming meetings, as the core number remains dangerously sticky.

As such, mortgage rates aren't expected to return to their pre-mini budget levels anytime soon, with the yield of the 10-year gilt taking a huge leap this morning. Further rate hikes should also prop up the sterling, which should act as a double down on cooling inflation, as it could result in 'cheaper' imports.

Andrew Bailey now walks a tightrope between hiking too much and causing a recession after the IMF's optimistic forecast yesterday, or not doing enough and getting inflation entrenched into the economy.
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Mark Grant
Business Finance Adviser at The Business Finance Branch
A 'milestone' reduction in inflation to 8.7% is the first time since August that we have recorded single-digit inflation data. This could give the Monetary Policy Committee cause to pause their run of 12 successive interest rate rises. In reality, prices for consumers and businesses are still almost 9% higher than a year ago. Many businesses will take months, or maybe years, to adjust and move forward from what has been a sustained period of cost and wage inflation, long after the headline inflation rate has reduced further. On a positive note, we see our clients who forecast and plan for their cash flow faring better in dealing with ongoing cost pressures on their businesses.
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Graham Cox
Director at Bridging Hub
Though expected, the first significant drop in inflation since the cost of living crisis began shows a chink of light at the end of the tunnel. However, for people on lower incomes, their personal inflation rate will remain much higher, as they spend disproportionately more on food and energy. Further Bank of England base rate increases are hopefully less likely, which could see Sterling come off its recent gains against the Dollar and Euro.
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Gary Bush
Financial Adviser at MortgageShop.com
The latest inflation figure at 8.7% is music to our ears and should give a fair reason for the members of the Bank of England Monetary Policy Committee to rest on their laurels and leave the base rate as it is. The mortgage market and property activity have both been good despite the bank base rate increases of late and so this will inject even more confidence into the market. I'd hope to see Sterling bounce on this news as in my mind having also dodged the recession bullet, the UK looks to have a brighter future.
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Hamish Anderson
Co-founder and Chief Executive Officer at Money Mover
Consumers, businesses and the Bank of England alike will feel some relief at Wednesday's fall in the headline rate of inflation. While the published rate of 8.7% is still higher than analysts' expectations and remains above competing economies in the US and the Eurozone, it is a welcome sign that the relentless rise in prices is slowing. For the UK's small and medium-sized businesses with customers, suppliers and operations overseas, recent cuts in energy and input prices will be welcomed. Pressure on prices has also led to spiralling wage inflation, impacting margins significantly. Even though Sterling weakness has improved their ability to export, economic uncertainty has hampered investment and growth. The entire business community will be looking for the Bank of England to signal a pause in the base rate rises that have placed immense strain on consumers and increased the cost of debt.