What's going on?

Data out on Wednesday showed that UK inflation shrank into the shadows last month � but that doesn’t mean it’s gone away.

What does this mean?

The price of goods and services in the UK rose only 8.7% in April versus the same time last year � the first time the inflation monster has been tamed into single digits in eight months. But that dropoff � down from 10.1% in March � doesn�t mean the price-hike beast has lost its claws. See, the cooldown wasn�t quite as chill as the Bank of England (BoE) expected, and while energy prices let up, the cost of groceries clung on near a 45-year peak. Plus, core inflation (which strips out volatile factors like food and energy) leaped from 6.2% in March to 6.8% last month � scary enough to sustain Brits� heebie-jeebies.

Why should I care?

For markets: Hiking higher.
The BoE has already said that it�ll only ease up on interest rate hikes when there are clear signs of ebbing inflation, and �clear� this mixed bag is decidedly not. With the country�s inflation still outpacing its major peers (like the eurozone�s 7% and 4.9% in the US), the BoE will be keen to nip this in the bud with even more rate hikes. That means economists� Magic 8 Balls are saying �Without a doubt� to another hike � and traders are betting rate increases will total nearly a full extra percentage point by the end of the year.

The bigger picture: Staying the course.
The IMF might�ve tipped the UK to sidestep a recession and outpace Germany�s growth this year, but Wednesday�s data shows the fight against inflation is still raging. And sure, that�s in line with the IMF�s warnings that more hikes could be called for � but to make good on the organization�s other predictions, the BoE and the British government can�t let off the gas anytime soon.