UK April CPI Services YoY Falls to 3.2%, Below Estimates

The UK April CPI Services YoY print came in at 3.2%, down sharply from the prior 4.5% and below the 3.5% estimate, signaling a notable easing in underlying inflationary pressures. The softer data suggests a meaningful decline in service-sector price pressures, a key focus for the Bank of England given its persistence in recent quarters, and improves the near-term inflation outlook. This reading strengthens the case for potential rate cuts later in the year by widening the gap between current inflation trends and the BoE’s 2% target, particularly as wage growth also shows signs of moderation. The release exerts downward pressure on gilt yields and increases pricing for BoE rate cuts in 2024, with two-year UK government bond yields falling sharply post-release. Traders will now closely watch the upcoming BoE minutes and May labor market data for confirmation of a dovish policy shift.

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