Martin Lewis issues inflation warning and says 'it is disappointing'
Martin Lewis has issued an inflation warning and said "it's disappointing". The BBC Sounds podcast presenter spoke out on ITV Good Morning Britain on Wednesday, May 22, as the Money Saving Expert founder was joined by Susanna Reid from 6am til 9am.
Mr Lewis has given his take on what inflation means for interest rates. "What we were expecting to hear was that interest rates would be somewhere between 1.9% at the bottom end and 2.3% at the top end," Mr Lewis said.
"The big thing here is that two percent is the Bank of England target." He went on to say: "Now, the reason inflation has dropped substantially for the April statistic is very easy - the energy price cap dropped 12 per cent on the 1st of April."
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He said that "we all knew there was going to be a big drop" for the latest ONS inflation figures because of the Ofgem price cap. But Mr Lewis added that the Consumer Price Index drop was only down to 2.3 per cent, saying: "That's on high side of the range of market estimates".
Paula Bejarano Carbo, an economist at the National Institute of Economic and Social Research, said core inflation – which strips out food and energy costs – remained higher than its historical average at 3.9% and this would need to fall before the central bank’s monetary policy committee was comfortable cutting rates.
“Paired with last week’s strong wage growth data, we believe that elevated services inflation will remain an upwards risk to inflationary pressures in the second half of this year. As a result, the MPC may exert caution at its upcoming meeting and hold interest rates, despite today’s encouraging fall in the headline rate," Paula said.
Martin Beck, an economic adviser to the EY Item Club, said: “The new fiscal year got off to a disappointing start for the UK’s public finances, with borrowing coming in above the OBR forecast. The effect on debt servicing costs of higher bank rate and gilt yields than the OBR assumed in its budget forecast mean that this under-performance is likely to continue for the rest of the financial year.
“It’s unlikely that OBR forecast revisions would offer the government scope for another tax-cutting fiscal event before the next general election.”