Aberdeen: Commentary on UK inflation figures
Luke Barthomolew, Deputy Chief Economist at Aberdeen, comments on the UK inflation figures:
'The inflation report is a little bit softer than expected, with the headline rate dipping and the crucial services inflation component also coming in below expectations. Obviously, this data comes before both the UK domestic national insurance and the international tariff impact. So much could change, but tariffs should be disinflationary for the UK economy, as they weigh on global growth and cause trade diversion.
Nonetheless, inflation is still likely to head higher in coming months due to an increase in administered prices and possible second round effects from higher taxes. But with the recent fall in energy prices and the stronger pound, the peak in inflation is now likely to be somewhat lower than the Bank of England has been forecasting. An interest rate cut in May looks increasingly nailed on, and the path to more easing in the second half of the year is getting clearer.'