UK inflation – latest: Rates set to return close to 2% target in boost for Bank of England

Good evening, and welcome to our inflation blog that will cover analysis and reaction to the figures that are due to be released on Wednesday.

The Bank of England (BoE) defines inflation simply as a term used by economists to “describe the increase in prices over time”.

Rising costs of goods and services on the UK high street indicate that the value of the British pound is in decline, which in turn means a reduction in consumers’ purchasing power and therefore their quality of life, as they are discouraged from spending more than they can afford.

This in turn eats into national economic growth.

Experts said April’s data could be “make or break” for the Bank, which has been waiting for firm evidence that CPI has reached its target level before it can cut interest rates.

James Smith, a developed markets economist for ING, said: “It’s no exaggeration to say that this week’s UK inflation data will make or break a June rate cut from the Bank of England.

“The result is that headline inflation will, we think, dip below the Bank of England’s 2% target in May’s data due in June and stay there for most – if not all – of this year.

“But in the very short term, there’s still some uncertainty over services inflation.

UK inflation could get close to the Bank of England’s target of 2 per cent when the latest figures are released by the Office for National Statistics (ONS) on Wednesday.

The Consumer Prices Index (CPI) dropped to 3.2 per cent for March, compared with the previous year, and forecasters polled by Reuters think inflation will drop to 2.1 per cent for April.

Pantheon Economics predicts a slightly lower figure of 2 per cent and Capital Economics thinks that it could dip even lower to 1.9 per cent. The Bank of England’s (BoE) own forecast is 2.1 per cent.