Inflation forecast to fall below 2% by the spring

The Bank of England may be forced to bring forward the date of its first interest rate cut after three leading forecasters issued a surprise update suggesting the inflation rate will halve to 2% by April.

- Phillip Inman

The consultancy Oxford Economics and analysts at Investec and Deutsche Bank have reassessed their outlook for inflation in 2024 and concluded the consumer prices index (CPI), which dropped to 3.9% last November, will fall below 2% within four months.

A slump in energy prices and the cost of oil on international wholesale markets will bring down inflation at a faster rate than the Bank of England expected when it reviewed price rises in November. The independent forecasters said a fresh review next month by the Bank was likely to follow their lead and predict a much lower path for inflation this year.

Before Christmas, members of the BOE's interest rate setting committee said lending rates would remain high during 2024 to reduce the prospect of a return to galloping price rises.