Due to the rise in energy prices, we now think that CPI inflation will fall to 2.5% in April (2.0% previously) before rebounding to 2.8% later this year. But with the labour market much weaker than it was during the 2022 energy price shock, as shown by our proprietary UK labour market indicators, the new hump in inflation will probably prove short-lived. We think the Bank of England will keep interest rates at 3.75% by the end of this year, and rates could perhaps eventually be cut to 3.00% in 2027, rather than rise to 4.75% as investors anticipate.