Wednesday’s stronger-than-expected inflation data coming on the back of yesterday’s hot labour market data means the Monetary Policy Committee (MPC) will probably raise interest rates by another 25bps in May.

Admittedly, inflation did fall from 10.4% in February to 10.1% in March. But this was a smaller fall than expected (9.8%).

More importantly, services inflation - which the MPC is watching closely as it is a much better reflection of pressures in the domestic economy - and core inflation were both stable.

The majority of the MPC will probably conclude that more work is needed to bring wage growth and inflation back to the 2% target.

Food price inflation continued to rise rapidly, as bad weather in Europe limited supply, and inflation remain strong in the recreation sector. This offset large falls in clothing, furniture and transport inflation.

The good news is that whatever happens with interest rates next month, inflation should decline rapidly from here, reaching 2% again by early 2024.

The risk is that a more resilient economy means the labour market remains tight and wage growth falls more slowly than the Bank of England is expecting, prompting rates to go higher and stay there for longer.

We expect 4.5% to be the peak for interest rates, but don’t rule out 5%.