The office for national statistics (ONS) reported on Wednesday that UK Core CPI, the inflation measure, dropped to 8.7% YoY

The Office for national statistics (ONS) reported on Wednesday that UK Core CPI, the inflation measure, dropped to 8.7% YoY, however, came in quite below analysts' expectations at 8.2%.

Markets have reacted with the FTSE dropping and the pound spiking higher as calls for further rate hikes from the central bank now seem more likely.

The UK labour market looks pretty tight and expectations of 3% inflation still seem quite far away. The central bank also admitted that previous economic models throughout the pandemic were inaccurate in predicting such inflationary rises and that there was ‘a big lesson to learn'.

It’s likely that inflation will continue to fall as oil and gas prices have dropped going into summer, however, will remain more elevated than over countries such as Germany, France and USA.