Inflation Insights: What the Latest CPI Prints Mean for Markets

Last week’s (Wednesday 16^th April) CPI (Consumer Price Index) revealed a decline in inflation to 2.6%, down from 2.8% in February, landing below the BoE’s forecast of 2.7%. Core CPI, which excludes energy and food, eased slightly to 3.4%, down from 3.5% the previous month. Reactions are mixed with many expressing doubts over the longevity of the good news as a result of current increased volatility in the market - knock-on effects are to be expected by institutional clients across the board.

What Caused the Headline Drop?

This marks the second month in a row that inflation has fallen, offering some encouragement as the inflation rate drops towards the 2% goal.

Some of the factors contributing to the numbers include a decrease in fuel, food costs and a slowdown in the price of recreation and culture goods including hotels, and software such as personal computers. However, not all sectors experienced price reductions with notable increases across clothes, cars and other recreational activities such as cinemas, theatres and concerts. Experts have met the news with scepticism referring to this as “the calm before the storm” as April’s increase in gas, electricity and water costs could cause inflation to jump to 3%.

How Have Markets Reacted?

CPI can have major effects on market positions by influencing expectations about the BoE’s future interest rate decisions. With the slightly subdued figures seen in March, speculation has already begun regarding potential rate cuts going forward in an attempt to stabilise inflation.

Financial markets have predicted a rate cut in May, with the possibility of further cuts throughout the year, carefully navigating the balance between controlling inflation and supporting economic growth. With Trump’s potential trade war looming, there is a lot of uncertainty around the short-term inflation impact for the UK.

Implications for Institutional Clients

The high-volatility environment requires close monitoring from institutional traders and proactive strategy adjustments. Clients should consider:

• Reviewing risk management frameworks to ensure they are protected against potential market volatility
• Assessing portfolio exposures to sectors sensitive to interest rate changes
• Partnering with reliable financial institutions to ensure access to stable liquidity, responsive execution, and real-time analytics during periods of uncertainty

At iSAM Securities¹, we support institutional clients with low-latency execution, deep multi-asset liquidity and real-time risk analytics tool to provide all the tools you need to navigate particularly volatile conditions.

Find out more about how we can support your business during this time - Contact

Sources

UK inflation slows before expected jump from April | Reuters

Consumer price inflation, UK - Office for National Statistics

¹ iSAM Securities (UK) Limited, iSAM Securities (HK) Limited and iSAM Securities (Global) Limited, iSAM Securities Limited and iSAM Securities (USA) Inc. are together “iSAM Securities”.