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Inflation below 10% as rates continue rising

Inflation below 10% as rates continue rising

24 May 2023

The latest CPI figures showed inflation falling to 8.7%, representing a welcome return to single digit inflation for the first time since August 2022.

In response to the ongoing high inflation levels, the Bank of England increased the bank base rate to 4.5% earlier this month, the 12th consecutive interest rate rise since December 2021. Long-term interest rates have also risen by c.0.3% over the month, with XPS Pensions’ DB:UK tracker estimating that this will have reduced UK pension scheme liability values by approximately c.£60bn.

Simeon Willis, Chief Investment Officer, XPS Pensions Group, commented: “In April last year prices rose by 2.5% in one month, heavily linked to energy price rises. Losing this upward spike in prices from the 12 month calculation was expected to bring inflation down markedly and it has. However, prices are still rising too fast and today’s headline figure was higher than expected. Price increases over the last 3 months alone exceed the Bank of England’s annual target.  April is typically the most volatile month of the year for price increases, and on average sees higher price increases than other months. As such, there is still scope for lower inflation to materialise in the coming months.”

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