📝Expect U.K. Headline CPI to Fall to 1.5% By May: ING

The projected downtrend is lower natural gas prices. Futures prices for wholesale gas for delivery later this year and into 2025 have roughly halved since the Bank of England's November Monetary Policy Report. These futures contracts form the basis of the energy regulator Ofgem’s price cap methodology, and it looks like households can expect another sizeable drop in their bills when the cap is next updated in April. This alone will shave 0.6ppts off headline CPI between November and May.

By April, headline inflation is set to fall below 2% and drop to 1.5% in May. We expect it to stay below 2% until November.

For now, we’re sticking with our call for the first cut to come in August. To some extent, that’s splitting hairs with investors, and the bigger story here is that markets are right to be pricing a series of cuts this year. We’re forecasting 100bp of easing in the second half of 2024.- ING