On the face of it, the March inflation figures are good news, with the headline Consumer Prices Index measure falling from 3.4% in February to 3.2% and the core measure, which strips out volatile elements such as energy, food, alcohol and tobacco, falling from 4.5% in February to 4.2%.However, both figures are higher than expected, with the market having looked for CPI of 3.1% in March and core inflation of 4.2%. To that extent, the figures are a disappointment.
The American experience is a reminder, should one be needed, that inflation does not come down in a straight line.The other recent lesson from the US is that inflation is proving stickier than expected – something that the Bank of England governor Andrew Bailey and his colleagues on the Monetary Policy Committee know only too well.At the beginning of the year, the market was expecting five, maybe even six, interest rate cuts from the US Federal Reserve. Now it is expecting two at best.
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