European stock markets opened lower on Wednesday, following higher-than-expected inflation in the UK and mixed signals from the US Federal Reserve’s rate policy changes. Investors have maintained their risk-on stance despite continued inflationary headwinds and central banks being pushed to consider rate hikes.

The pan-European Index Stoxx 600, which had hit a 14-month high during Tuesday’s session, fell by 0.19% in early trades, with the tech index falling by 1.41%. London’s Benchmark FTSE 100 also dropped by 0.38% to 7879.22 points. German DAX index slid 0.2% to 15,851.13 points. France’s CAC 40 shed 0.036% to reach 7530.92 points.

According to a statement issued by the UK Office for National Statistics, the consumer price index in the UK was 10.1% in March, up from 10.4% in February. This is a bittersweet result because markets expected inflation to fall into the single digits. However, the lower inflation rate is still good news for consumers nationwide.

According to data released on Tuesday, wage growth in the United Kingdom slowed less than expected in the three months to March, complicating the Bank of England’s decision on whether to pause hikes at its May monetary policy meeting.

It was mainly due to market participants’ expectation of a forthcoming monetary policy pivot and that the pivot will be effective, and inflation will become muted while economic growth begins to recover. Traders are concerned that interest rate hikes in the United States, the United Kingdom, and the eurozone will send economies into recession.

They hoped slower inflation would persuade policymakers to abandon their monetary tightening policies. The market had begun to speculate that the Bank of England would pause their campaign of interest rate hikes at their next meeting, but this less-than-expected decline may end those predictions.

Stock futures in the United States fell Tuesday night as traders weighed the latest round of earnings. Overnight, Asia-Pacific markets were mixed.

Inflation in the United Kingdom unexpectedly remained above 10% in March, fueling expectations that the Bank of England will raise interest rates by 25 basis points at its May meeting, despite pay growth slowing less than expected.

Prices rose 0.8% month on month. The core CPI, which excludes energy and food, remained unchanged at 5.7%. Motor fuels, housing, and household services drove downward trends, while food and recreation/culture became more expensive.