Hopes rise for rate cuts as energy price cap falls by £238

A steep cut in the energy price cap will help to crush inflation and open the way for the Bank of England to cut interest rates, economists have predicted. Industry regulator Ofgem is cutting the price cap by £238 from April, meaning households will pay an annual average of £1,690. The drop of 12pc takes bills to their lowest level in two years, following the supply chaos which followed Russia’s invasion of Ukraine. Imports of gas from America as well as a relatively mild winter in Europe have helped boost stocks of fuel, bringing down prices. As a result economists expect inflation to fall to, or even below, the Bank of England’s 2pc target for the first time since July 2021. This should allow the Bank’s Monetary Policy Committee, led by Andrew Bailey, the Governor, to cut interest rates from their current level of 5.25pc, according to James Smith, economist at ING. Falling energy costs “should be sufficient to take headline inflation below target in April to 1.9pc, and we think it could go as low as 1.4pc in June,” he said. “We think consumer price inflation is more likely to stay below target for the vast majority, if not all of...

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