New data shows U.K. inflation plummeting, in contrast to the U.S.
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The U.K. was once home to the developed world's worst inflation. Now, it's within striking distance of the central bank's 2% target.
Why it matters: It speaks to the different nature of inflation shocks on both sides of the Atlantic. Much of the rapid price increases in the U.K. resulted from soaring commodity costs after supplies from Russia were cut off — not strong demand, like in the U.S.
- Once the energy crisis subsided, inflation pressures started to ease notably.
By the numbers: The Consumer Prices Index rose by 2.3% in the 12 months through April — the smallest gain since the summer of 2021.
- That is down from the 3.2% in March, a plunge driven by an energy price cut that resulted in the largest annual fall in electricity and gas costs on record.
- The April data shows a plunge from the 3.2% in March, though economists thought it would actually drop further to 2.1%.
State of play: It comes as the Bank of England looks set to slash interest rates in the months ahead, though policymakers are trying to parse the stickiness of lingering inflationary pressures.
- Excluding energy, food, alcohol and tobacco, inflation cooled much less dramatically: It was 3.9% in April by this measure, compared to 4.2% in March.
- British Prime Minister Rishi Sunak cited on Wednesday the improved inflation figures in his pitch for re-electing his Conservative government after announcing the U.K. will hold a general election on July 4.
