UK inflation dips in relief before April household bills shock

UK inflation slipped back for a second straight month, providing some relief for households before they were hit by a huge increase in bills this month.

Consumer prices rose 2.6% in the 12 months to March, an easing from the 2.8% increase in February, the Office for National Statistics said Wednesday. The figure was below the 2.7% predicted by economists.

The slowdown was driven by falling fuel prices and unchanged food costs, the ONS said. Services inflation, which is being watched closely by the BOE for signs of domestic price pressures, fell to 4.7% from 5%.

The slowdown is some consolation for consumers who will see basic costs from council tax to energy and water bills rise by £600 ($795.81) on average in the financial year that began this month. That’s expected to push inflation well above 3% by the summer.

For the Bank of England, however, any pickup in inflation will be overshadowed by the fallout of Donald Trump’s trade war transforming the outlook on prices.

The White House’s tariff skirmishes have tightened financial conditions, sent energy prices sliding, weakened the dollar and darkened the global growth outlook, prompting traders to bet on more interest-rate cuts from the BOE — including a quarter-point move on May 8. There could also be trade diversion effects for officials to consider if exporters shut out of US markets, particularly China, seek other markets for their goods by discounting prices.

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