Time to recap….

City investors and economists have been pushing back their forecasts for cuts to UK interest rates, after inflation fell by less than expected to 3.2% in March.

The money markets are now pricing in less than half a percentage point cut to the Bank of England’s base rate by December, implying that we may only get one cut to borrowing costs this year.

Currently, the first cut is priced in for September or November, with the possibility of a second by the end of the year.

Deutsche Bank pushed back their forecast for the first cut to June, from May, while BNP Paribas are now predicting August, not June.

There was some disappointment that inflation didn’t fall further, as the City had expected a drop to 3.1% per year in March. Food price inflation did slow, but motor fuel prices picked up in the month.

The government tried to take the credit for falling inflation, insisting that it “wasn’t an accident”, but did concede that prices are still going up:

Goods inflation slipped to just 0.8%, but service sector prices rose by 6% per year.

UK inflation is now lower than the US, but higher than in France and Germany.

Bank of England policymaker Megan Greene has warned that the recent tensions in the Middle East could pose a risk to the UK’s inflation outlook.

Here’s the full story:

And our analysis, explaining how the prospect that rates might not be cut until November is bad news for Rishi Sunak, if he hopes to call an election in the autumn.

In other news…

• UK rents are rising at their fastest rate since the ONS started collecting the data in 2015

• Tesla is asking shareholders to again approve the $56bn pay package for Elon Musk that was voided by a Delaware court early this year.

• Metro Bank’s CEO has been hit with a 35% pay cut, after a tough year for the bank

And in other news:

The International Monetary Fund has issued a strong warning to Britain and other countries facing elections this year to avoid voter giveaways that might pose risks to their public finances, my colleague Larry Elliott reports from Washington.

In its half-yearly fiscal monitor, the IMF said the reduction in national insurance contributions (NICs) announced by Jeremy Hunt in his budget last month may have already made cutting the UK’s national debt more difficult.

There is speculation Hunt might announce further tax cuts ahead of an autumn election [as the chancellor hinted in our 6.38am blogpost] but the fiscal monitor makes it clear this would be against the advice of IMF officials.

The Washington-based fund’s analysis showed the national debt as a share of the economy’s annual output – the debt-to-GDP ratio – rising steadily in every year between now and the end of the 2020s – from 92.9% in 2024 to 98% in 2029.

The drop in UK inflation to 3.2% in March means Britain is no longer an outlier on inflation, says Resolution Foundation.

That’s because prices are now rising slower here than in America (where inflation rose to 3.5% in March), for the first time in two years.

Simon Pittaway, senior economist at the Resolution Foundation, says:

“Many economies have struggled through an inflation-driven cost of living crisis over the past two years, but the UK has been an outlier – experiencing a prolonged period double digit price rises. With UK inflation finally falling below the US, its unwanted outlier status is over.

“With a further significant drop due next month, inflation should soon return to target – and the pressure to cut interest rates will grow.”

One of the Bank of England’s nine policymakers who set interest rates has warned that the recent tensions in the Middle East could pose a risk to the inflation outlook.

Speaking in Washington, MPC member Megan Greene said the crisis could heighten inflation expectations, Reuters reports.

Greene told in a seminar hosted by the Institute of International Finance:

“I do think that what’s going on in the Middle East does pose a risk,”

“I’m worried about the sort of an energy price shock and other supply side shock, which obviously follow a number of supply side shocks we’ve seen over the past couple of years, and what that might do to inflation expectations.”

Greene also warned that the ‘last mile’ of the journey towards hitting the 2% inflation target was the hardest part.

Greene is one of the more hawkish members of the MPC. Late last year she voted to raise interest rates above their current level of 5.25%, but has been voted for no change this year.

Last week, she wrote that in her view, “rate cuts in the UK should still be a way off”.

Electric car maker Tesla is asking its shareholders to once again approve CEO Elon Musk’s record-breaking $56bn pay deal, which was rejected by a Delaware judge in January.

In its proxy filing issued today, Tesla’s chairperson Robyn Denholm argues that Musk has hit all the targets under that scheme, and that the mega pay packet would be good for shareholders.

Denholm writes:

The 2018 CEO pay package required Elon to deliver transformative and unprecedented growth to earn any compensation. It was a big risk, and many thought that the plan’s targets for benefits to stockholders were simply unachievable. But our company and our leaders have always had big dreams and it is fundamental to the entrepreneurial spirit of Tesla to take big risks for the chance at big rewards. This has led to the incredible innovation and progress — and economic gains — that we have achieved at Tesla. In 2018, we asked for unbelievable growth and accomplishments.

Elon delivered: Tesla’s stockholders have benefited from unprecedented growth under Elon’s leadership and Tesla has met every single one of the 2018 CEO pay package’s targets. And — most importantly for the future of Tesla — the 2018 CEO pay package built in further incentives to benefit Tesla stockholders by requiring that Elon hold onto any shares he receives when he exercises his options for five years — which means he will continue to be driven to innovate and drive growth at Tesla because the value of his shares will depend on it!

Denholm adds that Tesla does not agree with the Delaware Court, which decided the package – which allowed Musk to buy Tesla stock at heavily discounted prices as goals were hit – was set inappropriately.

Tesla is also asking shareholders to approve moving its state of incorporation from Delaware to Texas.

Investment bank BNP Paribas has pushed back their target date for the first UK interest rate cut to August, from June.

They told clients today:

March’s UK inflation data, on top of stronger-than-expected pay figures, suggest stickier inflationary pressures than we had previously thought, and we now expect the Bank of England to wait until August to start cutting rates (from June previously).

In addition, with rising oil prices, we now see headline inflation returning to target only around the middle of the year and core inflation remaining above 3.0% until July 2024.

We expect Bank Rate to end 2024 at 4.50% and 2025 at 3.50% (compared with our previous 4.25% and 3.25%, respectively).

Deutsche Bank has pushed back its forecast for the first UK interest rate cut, following the news that inflation only fell to 3.2% in March.

They now predict the first cut will come in June, rather than in May.

But, they still expect three quarter-point rate cuts this year, which is more than the City money markets anticipate (currently, fewer than two cuts are fully priced in).

Deutsche’s chief UK economist, Sanjay Raja, writes:

After holding onto our May rate cut call since last summer, we now shift our view.

A delayed start, slower pace, but scale of rate cuts unchanged (for now).Our previous baseline included 75bps of rate cuts this year starting in May. We now shift the starting date for rate cuts to June.

We still see the MPC delivering three quarter point rate cuts this year (June, Sep, Dec). But we now expect the MPC to deliver only four rate cuts next year (Feb, May, Aug, Nov), sticking to a quarterly pace through 2025 (previously, we saw six rate cuts in 2025). We expect two further rate cuts in H1-26 taking the terminal rate to 3%.

Risks are skewed to a slower start and higher terminal rate, but asymmetric risks will likely build in a higher for longer world.

Pay for Metro Bank’s chief executive has tumbled 35%, after the lender scrapped bonuses in light of sweeping cost cutting plans implemented in the wake of an emergency rescue deal in October.

Metro’s annual report, released this morning, revealed that Daniel Frumkin received a £0 annual bonus for 2023, down from the £451,000 he received a year earlier. It took his total pay packet down to £834,000, having fallen from £1.3m in 2022.

The board said it scrapped bonuses in light of the turmoil caused by Metro’s failure to convince regulators to loosen its capital rules. The lack of concessions left Metro with a balance sheet shortfall, sparking market panic until it secured an emergency deal that left it 53%-owned by the Colombian billionaire Jaime Gilinski Bacal.

Metro Bank explained:

“2023 was a pivotal year for the Bank. Whilst there were strong outcomes in relation to delivering operational changes whilst maintaining the focus on our customers and our colleagues, the Bank nevertheless had to undertake a refinancing (Capital Raise) in November 2023 which raised additional capital the Bank required to operate sustainably in 2024 and beyond. This meant that choices were required, which led to significant reductions in the cost base and colleague levels within the Bank.”

It added:

“A zero bonus payout was considered appropriate for the executive population as the Bank continued to focus on returning to profitability and maintaining its capital position.”

However, Frumkin won’t have to wait long to recoup those losses. The board has, in the meantime, approved a 20% salary hike that will take his base pay, alone, beyond that figure to £925,000 this year. That was approved on 1 January.

They’re also putting a new pay policy to shareholders, with some tweaks, including raising the maximum payout of the long-term bonus to 200% of salary, up from 100% previously.

Though there’s unlikely to be any major revolt on any of its proposals, given its new major shareholder has been helping shape Metro’s policies in the wake of the rescue deal.

Looking back at today’s inflation report, there are still some startling price increases among the items in the basket of goods and services used to measure the cost of living.

Within the food basket, olive oil is 38.9% more expensive than a year ago, while sugar is 14.2% pricier.

Cocoa and powdered chocolate cost 18.5% more than in March 2023, as the global shortage of cacao pushes up prices.

At the other end, butter is 11.7% cheaper than in March 2023, while milk is 11.1% cheaper following price cuts by various supermarkets in the last year.

The Energy and Climate Intelligence Unit has warned today that UK cooks face a cooking oil ‘double whammy’ price shock.

That’s because UK yields of oilseed rape, which is used for domestic and commercial vegetable cooking oil, are projected to be as much as 38% lower this year compared with 2023, after extreme wet weather in winter and early spring hit crops.

Tom Lancaster, land analyst at ECIU said:

“We’re seeing a double whammy on cooking oil. Be it Spanish olive oil or British vegetable oil, climate extremes are hurting crops and consumers are paying for it at the supermarket checkout.

Climate change has added £361 to food bills in the past couple of years and the failure of the British rapeseed oil harvest could see a hike in vegetable oil prices.

Newsflash: Czech billionaire Daniel Křetínský has confirmed that he has made an approach to take over Royal Mail’s parent company, and been rebuffed.

Křetínský’s EP Corporate Group has issued a statement to the City, in which it “notes the recent press speculation” in relation to Royal Mail owner International Distributions Services (see last post).

And it confirms that it has made a proposal to buy IDS’s shares which it doesn’t already own earlier this month – but that this was rejected by the company’s board [reminder, Křetínský owns 27.5% of IDS].

EP says it is now considering its options…

Here’s the statement:

EP Group confirms that, on 9 April 2024, it submitted a non-binding indicative proposal to the Board of IDS seeking its recommendation for a possible cash offer for the entire issued, and to be issued, share capital of IDS not already owned by EP Group and its affiliates, namely VESA Equity Investment S.à r.l (“VESA Equity”), currently the largest minority investor in IDS.

While EP Group’s proposal was rejected by the Board of IDS, it looks forward to continuing to engage constructively with the Board as EP Group considers all its options.

Under City takeover rules, EP now has until 5.00pm on 15 May 2024 to either make a formal offer, or walk away for six months.

Shares in Royal Mail’s parent company have jumped 20% on the London stock market, amid reports that Czech billionaire Daniel Křetínský is preparing a takeover bid.

Křetínský currently owns a 27.5% stake in International Distributions Services, and the Financial Times is reporting that he is poised to launch a bid to take control.

This has pushed IDS’s shares up by a fifth to 255p. Before this move, the company was worth just over £2bn.

The company was privatised a decade ago, at 330p per share.

Away from the inflation report, Post Office chief executive Nick Read has been “exonerated of all misconduct allegations” following a report into his behaviour, PA Media reports.

The external report, which the Post Office has not released, was said by former chairman Henry Staunton to contain allegations about Mr Read’s “conduct and lack of his management of the many governance and compliance issues”.

Today, the Post Office says the report, compiled by barrister Marianne Tutin of Devereux Chambers, had exonerated Read of all misconduct allegations and he had the “united backing of the board”.

In a statement, the Post Office said:

“Over the last few months an independent barrister has been investigating a Speak Up complaint into various allegations, which included a number of misconduct allegations against our CEO, Nick Read.

“Following several interviews and examination of documents by the barrister, Nick has been exonerated of all the misconduct allegations and has the full and united backing of the Board to continue to lead the business.

Staunton has revealed to MPs in February that Read was under internal investigation, and that the Post Office’s HR director had produced a ‘speak up document’, which was 80 pages thick.

Staunton claimed the speak up document has included Read’s pushing for a larger salary and threatening to resign.

The smaller-than-expected fall in inflation last month means that overall prices rose a little faster (3.2%) over the last year than expected.

Some elements of the inflation basket did become cheaper than a year ago (such as furniture and household goods, and household services), but most things became more expensive.

Some price rises, such as alcohol and tobacco, accelerated in March.

Here’s a breakdown of how the prices of various items changed year-on-year in March.

• Food and non-alcoholic beverages: +4%, down from +5% in February

• Alcohol and tobacco: +12.1%, up from +11.9%

• Clothing and footwear: +4%, down from +5%

• Housing and household services: -1.6%, up from -1.7%

• Furniture and household goods: -0.9%, having been unchanged (0%) in February

• Health: +6.6%, up from +6.5%

• Transport: +0.1%, up from -0.1%

• Communication: +7.5%, up from +5.6%

• Recreation and culture: +5.3%, down from +5.4%

• Education: +4.5%, matching +4.5% in February

• Restaurants and hotels: +5.8%, down from +6%

• Miscellaneous goods and services: +3.4%, down from +3.6%

Newflash: UK rents climbed at their fastest rate since at least 2015 last month, as tenants continued to be squeezed.

New data from the Office for National Statistics shows that the average UK private rent increased by 9.2% in the 12 months to March 2024.

That’s up from 9.0% in February, and is the highest annual percentage change since the ONS started collecting this data in January 2015.

Average monthly rents increased to £1,285 (9.1%) in England, £727 (9.0%) in Wales and £947 (10.5%) in Scotland, the ONS reports, adding:

• In England, private rent inflation in the 12 months to March 2024 was highest in London (11.2%) and lowest in the North East (6.1%).

• In Great Britain, the average private rent was highest in Kensington and Chelsea (£3,305) and lowest in Dumfries and Galloway (£475).

Laura Trott, chief secretary to the Treasury, says the drop in the inflation rate in March is “great news” for people, and claimed that the government should get the credit.

She told Good Morning Britain this morning:

We saw inflation coming down. Crucially we saw food prices coming down, and this hasn’t happened by accident.

This has been a result of the government working very hard with the Bank [of England], with the monetary policy committee, to make sure we’ve got these inflation rates coming down steadily now.

Real wages are now rising, and people can have a little bit more money at the end of the month, and that’s really good news.

However, food and non-alcoholic beverage prices actually rose by 4% per year in March (down from 5% per year in February), and rose by 0.2% during last month alone.

Trott then concedes that it’s the /rate/ at which prices are rising has fallen (this is important to remember: life isn’t actually getting cheaper).

Another fact check- the Bank of England is independent from the government, and it has the mandate to get inflation to 2% (which is why MPs have been blaming the BoE for being too slow to raise rates back in 2021).

Rachel Reeves, Labour’s shadow chancellor, has weighed in too, pointing out that inflation is still over target:

“Conservative ministers will be hitting the airwaves today to tell the British people that they have never had it so good. However, after 14 years of economic failure under the Conservatives working people are worse off.

“Prices are still high in the shops, monthly mortgage bills are going up and inflation is still higher than the Bank of England’s target. At the same time Rishi Sunak risks crashing the economy again with his Liz Truss-backed £46 billion unfunded tax plan to abolish national insurance.

Tomasz Wieladek, chief European economist at asset manager T. Rowe Price, reckons the Bank of England will be worried that the battle against inflation is not over.

He says elements of today’s inflation report, such as the high service sector inflation of 6%, will concern the BoE and make it cautious about cutting interest rates this summer.

Wieladek also suggests there’s a risk that interest rates could be hiked higher than their current 5.25%, if inflationary pressures stay high.

He explains:

UK CPI inflation fell to 3.2% in March from 3.4% in February, with core inflation dropping to 4.2% from 4.5%, and CPIH inflation held steady at 3.8%. However, services inflation remained relatively sticky, falling to only 6% from 6.1%. This relatively strong reading for services inflation was higher than consensus expectations of 5.8%.

These numbers are not easy to interpret, as a result of the early timing of Easter this year. Nevertheless, even accounting for Easter effects, it suggests underlying domestically generated inflation in the UK is significantly stronger than expected.

Together with the rising momentum in wage inflation, the sticky services inflation numbers raise the risk the UK inflation battle is far from over and perhaps not yet won. The MPC will be worried about this scenario, and I believe this strong reading will make the MPC cautious about cutting early in the summer. Indeed, given these strong domestic inflationary pressures in both wages and services, the MPC will now likely wait until late summer to get the required confidence to cut rates.

However, there is another risk that is not yet spoken about in the UK monetary policy debate. If services inflation and wages continue to remain persistently at these high levels, the risk the Bank of England will have to hike this year is rising. After all, the Bank of England is data-dependent. If the data continue to indicate policy is not tight enough to bring inflation back to target, the MPC may have to tighten policy further.

Currently, the money markets are still pricing in that rates will fall in future, with the Bank itself comparing its policy stance to hiking across Table Mountain (ie, rates are at their peak, but may stay there for a while).

The pound has gained ground in the currency markets this morning, another sign that investors are trimming their expectations for UK interest rate cuts.

Sterling is up 0.3% against the US dollar at $1.2463.

It’s still down around 1.3% during April, as the dollar has strengthened after US inflation rose more than forecast in March.

Against the euro, the pound is up 0.2% at €1.172.

The last mile in the journey to the 2% inflation target may feel like the longest to Britons, following the smaller-than-hoped drop in CPI last month.

So says Myron Jobson, senior personal finance analyst at interactive investor, who explains:

While the latest reading is marginally higher than expected, inflation continues to move in the right direction with the cooling of the areas of inflation that are most felt by Britons, such as food, stoking a sense of optimism over where prices are heading.

“Things are looking up, but the last mile to the Bank of England’s 2% target may feel like the longest to Britons who have endured daily battles against rising prices.

“After stripping out volatile food and fuel costs for a better sense of the underlying trend, core inflation came in at 4.2%, down from 4.5% in February. This reading matters because Bank of England policymakers monitor it to get a sense of inflation’s momentum and is one of the key considerations when it comes to setting interest rates.

Newflash: City investors are trimming their forecasts for how much the Bank of England will cut interest rates this year.

Following today’s smaller-than-expected drop in inflation in March, to 3.2%, the money markets are now only fully pricing in the first rate cut in November.

Before this morning, the first cut was expected by September.

Reuters reports that UK rate futures pricing now predicts about 34 basis points of cuts to Bank rate this year, down from 42bp on Tuesday.

That suggests that one quarter-point cut to interest rates, to 5% from 5.25%, is widely expected, with only a moderate probability of another this year.

That’s clearly a blow to borrowers desperate for lower interest payments, and also to the government’s hopes for several cuts to interest rates before the next general election.

Although UK inflation has fallen, prices are still rising faster here than in much of Europe.

Eurozone inflation was provisionally estimated at 2.4% per year in March (we get updated figures at 10am today).

In France, annual inflation slowed to 2.4%, while it was just 2.3% in Germany, as this chart from today’s UK inflation report shows:

In the US, though, inflation actually rose in March, to 3.5%, creating alarm that inflationary pressures are more stubborn than hoped.

March’s drop in inflation, to 3.2%, suggests CPI is on track to soon return to the UK’s official 2% target (partly because energy bills fell in April).

But there are risks to the inflation outlook, such as the danger of a spike in oil prices if turmoil in the Middle East escalates.

Yael Selfin, chief economist at KPMG UK, explains:

“The overall outlook for inflation remains broadly positive, however there are several risks which could cause a setback. Oil prices have rallied over the past month which has led to an increase in prices at the pump for consumers. Also, the hike in the National Living Wage could potentially contribute to persistence in services inflation which remains elevated.

“Today’s data are unlikely to move the needle for the Bank of England. We expect inflation to return to target later this spring, which raises the prospect of interest rate cuts from June onwards.

The UK’s annual inflation rate fell in March for a second consecutive month, dropping to 3.2% – the lowest level since September 2021 – easing pressure on households amid the cost of living crisis.

Figures from the Office for National Statistics (ONS) show inflation as measured by the consumer prices index continued to fall from 3.4% in February. City economists had forecast a reading of 3.1%.

A reduction in the rate of inflation does not mean that prices are falling, just that they are rising more slowly. The last time inflation was lower was in September 2021, when it was 3.1%.

It comes as the Bank of England considers the timing of a first cut in interest rates after ramping up borrowing costs to the highest level since the 2008 financial crisis in response to soaring inflation. The measure for the annual increase in living costs reached a 41-year high of 11.1% in October 2022 after the Covid pandemic and Russia’s invasion of Ukraine.

More here.

The price of petrol rose by 2.6p per litre in March, today’s inflation report shows, to an average of 144.8p.

That’s still lower than a year ago, when it was 146.8p.

Diesel prices rose by 2.8p per litre in March to 154.1 pence per litre, down from 166.5p per litre in March 2023.

These movements resulted in overall motor fuel prices falling by 3.7% in the year to March 2024, compared with a fall of 6.5% in February.

Skimming through the UK inflation report, we can see that food inflation fell to its lowest level in almost two and a half years.

Prices for food and non-alcoholic beverages rose by 4.0% in the year to March 2024, down from 5.0% in February. The March figure is the lowest annual rate since November 2021, the ONS reports.

Inflation bread and cereals, and for meat, both eased.

The ONS explains:

Prices for bread and cereals rose by 0.2% on the month, compared with a rise of 2.2% a year ago, resulting in an annual rate in March 2024 of 4.0% – the lowest since January 2022. Prices of some bakery products, such as chocolate biscuits and crumpets, fell between February and March 2024 but rose between the same period a year ago.

Meat prices fell by 0.5% between February and March this year, compared with a rise of 1.4% a year ago.

This resulted in an annual rate of 3.1% in the year to March 2024, the lowest rate since November 2021. The main downward effect behind the easing in the rate came from pork products.

Core UK inflation has also fallen.

The ONS reports that CPI (excluding energy, food, alcohol and tobacco) rose by 4.2% in the 12 months to March 2024, down from 4.5% in February.

Goods price inflation fell to just 0.8%, from 1.1%.

But services inflation was higher – it only eased slightly from 6.1% to 6.0%.

The largest downward contribution to the monthly change in UK inflation came from food, with prices rising by less than a year ago, the Office for National Statistics says.

But petrol and diesel prices had an upward impact – motor fuels prices rose in March this year but fell a year ago.

Newsflash: UK inflation has fallen to its lowest level in two and a half years, as price pressures continue to ease.

The consumer prices index has dropped to 3.2% in March, the lowest since September 2021, down from 3.4% in February.

That’s slightly higher than City economists expected (they’d pencilled in a drop to 3.1%).

It brings inflation further towards the UK’s 2% target, and away from the 40-year peak over 11% in autumn 2022.

But although inflation has fallen, prices are still rising compared with last year – just at a slower rate.

It means real wages are still rising, as regular pay grew by 6% per year in the three months to February.

Economists expect a further decline in inflation in April, with potential to fall below the Bank’s 2% target after a sharp drop in household gas and electricity bills to the lowest level for two years.

Chancellor Jeremy Hunt has raised the possibility of further tax cuts before the next general election.

Speaking to the Financial Times, Hunt said the government would like to cut taxes in an autumn fiscal event “if we can”.

He also cautioned, though, that it’s too soon to know if that will be possible, while acting in a fiscally responsible way.

Hunt argued that people would feel the economy had “turned a corner later this year”, citing market forecast that the Bank of England would cut interest rates this summer or autumn.

The chancellor explained:

“As we move through the year towards the autumn, some of the changes in economic policy, including lower taxes, will be felt in people’s pockets — and that’s clearly something that is significant for us.”

Hunt didn’t leave himself much headroom for further tax cuts in March’s budget, when he announced a second cut to national insurance rates.

But this month, we have ticked into a new financial year – which gives the chancellor more time to hit his fiscal rule of getting debt/GDP falling in five year’s time…..

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Britain may take another step out of its cost of living crisis today, when the latest inflation report is released at 7am.

Economists are hopeful it will show inflation fell again in March. The consumer prices index is forecast to drop to around 3.1%, down from 3.4% in February, showing prices rose at a slower pace.

That would pull inflation down to its lowest since September 2021 (when CPI was also 3.1%), before Russia’s invasion of Ukraine the following year sent food and energy prices spiking.

A slowing in price rises would help struggling households. Yesterday, though, the IMF warned that living standards will not improve this year.

Growth per head – one of the key measures of living standards – in Britain is expected to remain flat this year, after a 0.3% drop in 2023.

The Bank of England is looking for signs that services inflation has weakened, as it weighs up when it can start lowering UK interest rates from their currrent 16-year high.

And Rishi Sunak will be hoping for a drop in inflation that allows the Bank to start cutting rates before the next election.

Last night, BoE governor Andrew Bailey expressed confidence the UK was on its way to lower rates despite the turmoil in the Middle East.

Interviewed in Washington, at the IMF/World Bank annual meeting, Bailey said the UK was “disinflating at full employment”.

The governor said:

“There is strong evidence the process is working its way through. Our judgement on interest rates is how much do we need to see before we are confident of the process”.

The financial markets have been rattled in recent days by fears that inflation in America is stickier than hoped.

Last night, Federal Reserve chair Jerome Powell conceded it is likely to take “longer than expected” for inflation to return to the central bank’s 2%, allowing cuts to US interest rates.

The agenda

• 7am BST: UK CPI inflation report for March

• 7am BST: UK producer price inflation report for March

• 9.30am BST: UK house price and rental costs data

• 10am BST: Eurozone inflation report for March (final estimate)

• 2pm BST: IMF to release its latest Fiscal Monitor report