GBP england inflation

High UK inflation, helps to a rate hike

Today’s unexpectedly high CPI growth and the above-consensus reading on core inflation means is now more likely another next month 25bp rate hike from the BOE (Bank of England).

Although these data all indicate high inflation and higher-than-expected costs for the UK, it should be taken into account that UK inflation has been on a downward trend in the past few months.

core CPI stayed at 6.2%, having been expected to slip back towards 6%. Headline inflation unexpectedly stayed in double-digits at 10.1%, though that will start to change in April when the effect of last year’s electricity/gas price hike filters out of the annual comparison. We expect headline CPI to reach the 8% area next month, 5% by summer and roughly 3% around year-end on current trends.

The core CPI printed at 6.2% as expected (prev was 6%), while headline inflation was unexpectedly at 10.1%. However, the effect of last year’s electricity/gas price hike will filter out in April, and headline CPI is expected to reach 8% next month, 5% by summer, and roughly 3% around year-end.

Core CPI is much more important for BOE. Because service-sector inflation trends are more persistent and relevant over the long term for monetary policy.

Instead, it is core goods inflation that is proving much stickier than expected.

with the clear disinflationary trend in durable goods, We doubt high inflation will last given improving supply chains, lower input costs, as well as the lower orders-to-inventory ratios we’ve seen in the surveys over recent months. The Bank of England itself said something similar in its most recent set of meeting minutes.

There is a clear trend of disinflation in durable goods, and the improving supply chains and lower input costs suggest that high inflation will not last. The Bank of England also expressed a similar sentiment in their recent meeting minutes.

However, the data was high enough to push the pound higher across all currency pairs.
The thing is, in this situation, we cannot be very confident about the continued growth of the pound, and even with this positive sentiment, we cannot propose a decline for the pound. because all the data is priced until next BOE meeting, For now, patience is the best option.

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Andrew Bailey BOE

Inflation is likely to come down sharply in the UK, it’s very high

Bank of England, Andrew Bailey BOE: Inflation is likely to come down sharply in the UK, it’s very high.

The economy is stronger than expected, but wages are weakening.

What monetary policy can and should do is to make sure that the inflation that has arrived from abroad does not turn into sustained inflation at home.

As we look at the inflation outlook today, we must be aware that the full impact of the higher bank rate has yet to be felt in financial markets and the real economy.

Sometimes, changes in supply can be as sudden and as important to the inflation outlook as changes in demand.

If swelling persists, additional contraction is required.

The MPC will base its decision on evidence as it emerges.

Bank Of England BOE GBP

Bank of England hikes by 25bp

7 members out of 9 voting members of the Bank of England voted to increase and 2 members voted not to change the interest rate.

Bank of England monetary statement

Second-quarter inflation is likely to be lower than forecast in February due to longer-term energy price caps and lower wholesale prices.

If there are signs of continued price pressures, further tightening of monetary policy is necessary.

The UK banking system has strong capital and liquidity and remains resilient.

Unexpectedly strong core inflation in February reflects clothing prices that may not last long.

The UK banking system is well placed to support the economy, including in a period of higher interest rates.

We will continue to pay particular attention to UK credit conditions.

Wage growth is likely to ease slightly faster than forecast in February as inflation expectations ease.

The fiscal support in March’s budget would boost GDP by around 0.3% in subsequent years.

Businesses expect inflation next year to reach 5.6 percent in the three months to February, compared with 6.2 percent in the three months to November.

No increase in the unemployment rate is forecast and we forecast 0.2% employment growth in the second quarter, up from the -0.4% forecast in February.

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