You are here: cherry > Press releases for May 2024 > Should we fear future deflation? Phoebus comments on inflation drop to 2.3%
Back

Should we fear future deflation? Phoebus comments on inflation drop to 2.3%

22 May 2024

Adam Oldfield, chief revenue officer at Phoebus, said:

“Today’s continuing fall in inflation to 2.3% from 3.2% can mainly be attributed to the sharp drop in the energy price cap in April, which reduced domestic bills. This, alongside stronger than expected growth in Q1 has put the UK economy in a much stronger position.

While we are so close to the Bank’s 2% sweet spot, in terms of a rate reduction come June, however, we may still be holding our breath. When it comes to decision-making, the Bank of England will be looking at persistent levels of inflation which cut out external forces such as gas and electricity prices. They will be closely monitoring, for example, the health of the UK service industry.

Perhaps come 20th June, the BoE will align with The Institute of Economic Affairs’ Shadow Monetary Policy Committee (SMPC) stance and reduce the base rate. In May, the SMPC advised an urgent and significant rate reduction to 4.75%, fearing future deflation on the back of rapidly falling inflation.”