Sky's Gurpreet Narwan explains why a sharp drop in inflation lies ahead but says the highest rate of food price inflation for 45 years will take longer to ease back down.
The government has made it its primary aim to halve inflation by the end of the year but things aren't quite going to plan.Economists were expecting the headline rate to fall from 10.4% to 9.8% in March but it onlyThis may not seem hugely significant, but it has massively raised the prospect that the Bank of England will have to raise Bank rate again to help bring inflation down to target.
By raising interest rates the Bank is trying to dampen demand in the economy, which it hopes will help bring prices back down.This strips out volatile components like food and energy, which can swing wildly from month to month, and gives economists a better view of domestically generated inflationary pressure.This remained stubbornly high at 6.2% in March. Economists thought it would come down.
This is something policymakers pay close attention to because higher wages may force businesses to put up prices to cover their costs. Wholesale gas prices have been falling consistently and are now lower than they were in February last year, before the war in Ukraine started.
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