Economists and Investors Revising Forecasts for Interest Rate Cuts as UK Inflation Slows

The Bank of England’s battle against inflation received a slight boost as UK inflation slowed slightly last month. With the Consumer Prices Index standing at 3.2% in March, down from 3.4% in February, economists and investors are revising their forecasts for interest rate cuts this year.

The Office for National Statistics (ONS) reported that the drop in inflation was driven by slower increases in food prices, but it still remained above the 3.1% reading expected by experts. Additionally, services inflation was higher than expected, showing a mixed picture of the economy.

UK interest rates currently sit at a 15-year high of 5.25% as the Bank of England aims to control inflation. With stronger-than-expected wage growth and continued economic growth in early 2024, economists are pushing back their forecasts for reductions to interest rates.

Industry experts like Peter Stimson from MPowered and Matt Smith from Rightmove’s mortgage division agree that the stability in mortgage rates is a positive outcome. Paresh Raja, CEO of Market Financial Solutions, anticipates a rate cut in June, pending actions by the US Federal Reserve.

Overall, while the economic environment remains challenging, the recent data and forecasts are instilling confidence in the property market. Buyers, investors, brokers, and lenders are preparing for a more accommodative monetary policy environment, with expectations of prices continuing to rise steadily throughout the year.