Markets moved quickly to lower expectations of a Bank of England rate cut after UK inflation fell less than expected last month.
The pound has shot higher on the back of the inflation data, up 0.3% to $1.2745.
Having been pricing around a 50% chance of an interest rate cut in June this quickly downgraded to only a 19% chance, said Kathleen Brooks, research director at XTB. The market is now expecting the first cut between September and November.
This followed the CPI annual headline rate falling to 2.3% in April from 3.2%, which is the lowest level since the summer of 2021 but not as low as the 2.1% that the market and the BoE were expecting.
All readings of inflation on both a monthly and annual basis coming in stronger than expected, including service prices, which are keenly watched by the Bank's monetary policy committee.
Service price inflation moderated to a 5.9% annual rate while the market had been looking for a reading of 5.4%.
"The lack of deeper progress on price growth means that a June rate cut looks less likely today," Brooks said.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said: "An August interest rate cut looks much more likely than a June reduction after services inflation shockingly barely fell in April."
He added: "We suspect the MPC built into their forecasts a margin for error, to try and ensure the April inflation print came in below their forecast. Instead the data exceeded their call by 0.2pp [percentage points] for headline inflation, 0.4pp for core — we estimate — and 0.4pp for services.
"Services inflation has likely taken on a larger weight in the MPC’s thinking, because labour market data have become unreliable, and this miss is big enough, we think, to shift their thinking. It’s hard to argue inflation is on a quick path sustainably back to target when services inflation is barely declining."
Capital Economics' chief UK economist, Paul Dales, said the smaller-than-expected fall in CPI "makes a June rate cut unlikely and casts some doubt over August too".
"To some extent, it also makes our forecast that rates will fall from 5.25% now to 3.00% next year look more challenging."
Dales said the release will be "a bit of a blow for the BoE and the Prime Minister." Inflation is closer to the 2% target than it has been in three years and is now below the rates in the euro-zone and the US for the first time in two years.
However, the small drop in services inflation "suggests that domestic inflation is decreasing even slower than the BoE expected."
He pointed to restaurants and hotels inflation rising from 5.8% to 6.0% and cultural services inflation from concerts, cinemas etc rose from 5.4% to 8.3%.
"This and the smaller-than-expected easing in core inflation from 4.2% to 3.9% may mean that businesses are passing on some of the rise in the minimum wage since 1st April in their selling prices," Dales added.
The next meeting of the BoE committee will be on 20 June, before which the Office for National Statistics will release one more set of wages and CPI data.