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UK inflation is likely to fall to 2% in the second quarter of 2024, which would be in line with the Bank of England’s long-term target.
But the central bank said this could be only a temporary dip, as inflation is likely to pick up again afterwards.
Factors that could cause inflation to spike again include rising transport costs due to disruptions in the Red Sea, higher minimum wages, and higher business rates.
Inflation statistics for February will be released on March 20th, and the MPC will announce interest rate decisions on March 21st.
Susannah Streeter, head of finance and markets at Hargreaves Lansdown, said: “We are on a downward escalator, with inflation expected to fall further and downward revisions to the outlook to accelerate in coming months. Deaf,” he said.
“However, Bank of England policymakers still intend to hold their ground and keep interest rates rising. They will want more evidence that wage growth will slow further before moving to cut rates. .”
Hargreaves Lansdown expects the Bank of England to cut benchmark interest rates in June or August.
Streeter added: “A rate cut in June is planned, but a rate cut in August may be more likely when the central bank releases its summer monetary policy report.”
“Of course, given lackluster growth, reluctance to cut interest rates too soon means inflation could fall below target and the economy will take longer to recover. But for now, it’s a risk that policymakers seem willing to take.”