This morning’s CPI data show headline inflation falling to 8.7% in April from 10.1% in March as energy price hikes last year fell out of the annual comparison. However, the out-turn for CPI inflation is well ahead of market expectations for 8.2%.

Core CPI inflation accelerated unexpectedly to 6.8% from 6.2%. This reflected services price inflation rising to 6.9% with stronger contributions across a broad range of categories (communications, recreation and culture and transport) – suggesting no temporary idiosyncratic factors explain the rise in core inflation.

The out-turn for CPI inflation in April is also well ahead of the Bank of England’s forecast for 8.4%. It also follows the news that private sector regular pay growth was still 7% in March. The Monetary Policy Committee will have to conclude that evidence of persistent inflationary pressure, which it had warned would justify further rate hikes, is materialising.

Yesterday, options prices almost fully priced in a hike to 4.75% at the June 22nd policy meeting, with the curve rising to 5% by September. This morning’s CPI data will fuel speculation that the MPC may have to go further.