Tomorrow (May 21st), the UK government will release its monthly inflation numbers. As of March, the annual rate of inflation is trending at 2.6%. The Bank of England holds a mandate to move inflation down to 2% but last month the Bank decided to cut rates even while heightened prices remain.
Julien Lafargue, Chief Market Strategist at Barclays Private Bank, anticipates a higher print for CPI, even while expressing his belief that over the long run inflation is headed lower.
“April is likely to show UK headline inflation jump back up above 3%. This is driven by a number of one-off adjustments, including the new National Insurance contributions and the increased National Living Wage. There is also the impact of Easter, which fell squarely in April in 2025 but was in March in 2024, as well as the lovely weather that the UK has experienced in recent weeks,” says Lagargue.
He adds that tomorrow’s announcement will make for a “noisy report” at a time when the Bank of England is trying to figure out to navigate the volatile environment.
“… beyond the short-term distortions, we believe the overall direction of travel for UK inflation is lower,” Larfarge believes. “This should provide the central bank with room to consider at least a couple more interest rate cuts this year, supporting favourable economic conditions going forward.”
Meanwhile, US trade policy continues to roil global markets. Even while the UK has an agreement in principle, markets are intertwined making prognostications that much more difficult in the long run.