Bank of England raises UK interest rates to 4.5 percent. As expected, on Thursday, the Bank of England (BOE) hiked its benchmark interest rate by twenty-five basis points in an attempt to tame stubborn domestic price pressures. The BOE raised interest rates for a record-breaking 12th successive meeting, taking the benchmark cost of borrowing to 4.5 percent and warning that inflation would be higher during 2023 than it had forecast. The rate decision comes on the heels of persistently high inflation, with a recent negligible decline from an annual rate to 10.1 percent in March leaving, the UK with the highest inflation rate in the G7 group of advanced economies. The BOE kept the guidance on future hikes unchanged, which keeps the door open for hikes. Future hikes are dependent on evidence of more persistent inflation pressures, particularly to upside surprises in services consumer price inflation and private sector pay. The Bank of England’s inflation target remains two percent.

US annual inflation slows to below five percent. The year-over-year inflation in the US, as measured by the Consumer Price Index (CPI), eased more than expected last month, fanning speculation that the Federal Reserve (Fed) could relax its aggressive monetary stance. The CPI, which measures the prices of a broad range of goods and services, increased 0.4 percent in April, broadly in line with estimates, according to a Labour Department report published on Wednesday. That equated to an annual increase in prices of 4.9 percent, down from March’s five percent and slightly less than the five percent estimate. The annual rate was also the lowest since April 2021.  On the other hand, the so-called core CPI, that excludes the volatile food and energy items, rose 0.4 percent month-on-month and 5.5 percent from the year ago period, both in line with expectations. "Today's consumer inflation report supports the case for the Fed to seriously contemplate a pause in rate hikes in June, but does not support any near-term rate cuts," said Scott Anderson, chief economist at Bank of the West in San Francisco.

House prices in the UK fall by almost £1,000 in April. UK house prices unexpectedly fell in April as the Bank of England’s policy to raise interest rates to weaken persistently high inflation weighed on affordability and blunted demand, survey results by mortgage lender Halifax showed Tuesday. Average prices fell 0.3 percent, or around £1,000, in April compared with a month earlier, taking the typical UK house price to £286,896. This is about £7,000 below the peak last summer, but still about £28,000 higher than that in 2021. Recent house price movements have largely mirrored the short-term volatility seen in borrowing costs.

China inflation slows to near zero as rebound remains uneven. China’s consumer inflation slowed to a two-year low in April, fuelling further, discussions that more policy stimulus is needed. China’s consumer price index rose 0.1 percent in April, compared to the same period last year, the National Bureau of Statistics said Thursday, reflecting subdued domestic demand as well as base effects of the lockdowns. Core CPI, which excludes volatile food and energy costs, was unchanged at 0.7 percent. Inflation has largely moderated in China following its reopening, prompting market watchers to question whether the world’s second-largest economy is heading into deflation, BofA’s chief China economist Helen Qiao wrote in a Tuesday note.

In case of any queries, please email us on [email protected] or call on 2275 3857.