Strongly negative base effects ensured a sharp decline in inflation in April. With prices jumping an energy-led 2.5 percent on the month a year ago, a 1.2 percent gain was small enough to slash the annual rate from 10.1 percent to 8.7 percent, its first sub-10 percent outturn since August 2022 and its lowest reading since March 2022. However, the deceleration was well short of expectations and inflation still stands some 6.7 percentage points above the BoE's medium-term target.

Moreover, by far and away the main negative effect on the change in the annual rate was made by energy with electricity and gas subtracting fully 1.4 percentage points. Other downward impacts were only minor. Elsewhere, recreation and culture prices rose a monthly 1.4 percent after a 0.2 percent fall a year ago, adding 0.2 percentage points, while alcohol and tobacco (3.6 percent after 0.1 percent) added 0.1 percentage point. Most other categories similarly provided a small boost.

As a result, the core CPI followed March's steep 0.9 percent monthly gain with an even sharper 1.2 percent spurt. This lifted the underlying annual inflation rate from 6.2 percent to some 6.8 percent, its strongest print since March 1992.

Consequently, today's report will reinforce worries at the BoE that inflation is becoming more persistent than it previously feared. Another hike in Bank Rate next month is now a good deal more likely. More generally, the UK's ECDI now stands at 2 and the ECDI-P at minus 18, the gap between the two measures underlining the recent surprising strength of domestic prices.

Consumer prices are expected to increase 0.8 percent on the month in April for an 8.3 year-over-year rate. Respective rates in March, which were higher than expected, were plus 0.8 and 10.1 percent.

The consumer price index (CPI) is an average measure of the level of the prices of goods and services bought for the purpose of consumption by the vast majority of households in the UK. It is calculated using the same methodology developed by Eurostat, the European Union's statistical agency, for its harmonised index of consumer prices (HICP). The CPI is the Bank of England's target inflation measure.

The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries such as the UK, where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer. Inflation is an increase in the overall price level of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments.

Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.

By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.

For monetary policy, the Bank of England generally follows the annual change in the consumer price index which is calculated using the European Union's Eurostat methodology so that inflation can be compared across EU member states.