UK inflation, March 2024

Employees deliver drinks to a bar in London, England, Tuesday, April 16, 2024.

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The Office for National Statistics said on Wednesday that UK inflation eased to 3.2% from 3.4% in March, but the higher-than-expected figure pushed back investor expectations about when the Bank of England will cut interest rates for the first time. .

Economists surveyed by Reuters expected 3.1%.

The ONS said food prices provided the biggest drag on headline rates, while motor fuel drove them higher.

The core index excluding energy, food, alcohol, and tobacco was 4.2%, significantly lower than the forecast of 4.1%. Services inflation, a key watchdog for UK monetary policymakers, fell again to 6% from 6.1%, exceeding the expectations of both economists and the BOE.

Investors this week have been watching for signs that the UK labor market is cooling, with the unemployment rate unexpectedly rising to 4.2% between December and February. Meanwhile, wage growth excluding bonuses fell from 6.1% in January to 6% in February.

BOE Governor Andrew Bailey said on Tuesday he had seen “strong evidence” that higher interest rates were working to curb inflation, which has cooled from a peak of 11.1% in October 2022. In the spring, it briefly falls to the 2% target and then increases slightly.

However, with core print in March well above expectations and well above 4%, speculation is likely to increase that inflation is tighter than recent forecasts suggest, and the timing of the first rate cut may be delayed further.

Market prices changed on Wednesday, with the majority of investors seeing a first cut of 25 basis points in September or November at the current rate of 5.25%, with only about a 25% chance of a June price adjustment.

Signs of persistent inflationary pressures in the United States have also raised uncertainty about the actions of central banks around the world, with analysts questioning who will move before the Federal Reserve.

'America direction'

Camille de Courcel, head of European rates strategy at BNP Paribas, told CNBC's “Squawk Box Europe” on Wednesday that the latest data showed the U.K. was “heading in the direction of the United States” and presented a risk to its previous call for June rates. said. BOE cut it.

The ONS warned that while labor data showed a downward trend, monthly figures could be distorted by methodological issues. This will force the BOE's monetary policy committee to focus much more on the upside to wage growth and services, de Courcel said.

Some expect inflation to fall sharply in next month's figures due to the year-on-year impact on utility prices.

Ruth Gregory, deputy UK director at Capital Economics, expects print yields to fall below the 2% target in April and said in a note on Wednesday that the BOE would still fall below 6% if inflation continues to fall in the coming months. They said I could opt for a monthly cut. But geopolitical tensions in the Middle East raise the risk of U.S.-style rigidity or inflation, she added.

The British pound rose against both the US dollar and the euro following the announcement, rising 0.3% to $1.246 against the greenback and 0.2% to 1.172 against the euro.

British Chancellor of the Exchequer Jeremy Hunt, who is preparing for this year's general election, said the inflation data was “welcome news” on social media platform X.

Sources 1/ https://Google.com/ 2/ https://www.cnbc.com/2024/04/17/uk-inflation-march-2024.html The mention sources can contact us to remove/changing this article

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