"UK inflation outlook improves amidst global trade turmoil ” says Yael Selfin, Chief Economist at KPMG UK.
“Ongoing global trade tensions have contributed to a notable drop in energy prices which could help ease inflationary pressures in the UK. If the decline is sustained, household energy bills could decrease by nearly 10% when Ofgem sets the new energy price cap for the third quarter next month. Furthermore, oil prices have also fallen sharply, which could lead to lower fuel prices at the pump for motorists in the coming months.
“Goods inflation eased to 0.6% in March. The tariffs imposed on the UK and its main trading partners could see goods prices ease further in the coming months. Trade diversion may lead to discounted exports from European and Asian markets being redirected to the UK. The deflationary impact of the tariffs could provide the Bank of England with more room to cut interest rates, provided underlying inflationary pressures continue to moderate.
“Headline inflation fell to 2.6% in March, driven by a decline in fuel prices, recreation and culture, while core inflation also eased, falling to 3.4%. However, we expect headline inflation to rise from April onwards as higher labour costs begin to feed through and the Q2 Ofgem energy price cap pushes household energy bills higher.”
