UK: Inflation Rate Falls but Concerns Remain

Facts

The UK’s Office for National Statistics has revealed that, as calculated by the consumer price index, the rate of annual inflation fell to 8.7% in April.¹
The level decreased by 1.4% from 10.1% and has largely been credited to the stabilization of energy prices. However, the rate remains higher than economists' predictions of 8.2% and the Bank of England's projection made two weeks ago.²
Despite inflation rates falling to levels last seen in March 2022, food prices are still up 19%, year-over-year, which Chancellor Jeremy Hunt described as still "too high." Hunt met with food manufacturers on Tuesday this week to discuss measures to lower food costs.³
The average annual grocery bill in the UK reportedly stood at £833 (US$1,035) more than a year ago, with the prices of wine, fresh cream, and pastries all soaring as people "got into the spirit" of King Charles III's coronation.⁴
Prime Minister Rishi Sunak has promised to halve inflation to approximately 5% by the end of the year, though the April numbers stand as the joint-second highest inflation rate in Western Europe — tied with Italy and 1.2% below Austria.⁵
The data comes a day after the International Monetary Fund reversed its previous opinion that the UK would enter a recession this year, estimating 0.4% growth in 2023.⁶

Narrative A, as provided by The Telegraph. A fall in the inflation rate is long overdue and will be welcomed by consumers. As food prices come down, albeit slowly, the UK will do well to avoid new regulatory burdens and limit the cost impact of new policies. What the government could do, however, is investigate whether the nation's largest grocers, as has been the case in the past, have artificially bumped up prices under the guise of the inflation crisis.
Narrative B, as provided by Movies. While the inflation rate slow-down is a sigh of relief, the reality is that "core inflation" — which strips away volatile sectors from the calculation — still rose in April. With food prices continuing to soar, pressure is bound to mount on the Bank of England as the UK still has a long way to go to lower inflation back to 2%. While the pain from interest rate hikes will continue, the Bank has a vital role to play until it achieves normal rates again.