British Pound: BoE outlook steady with CPI and jobs data – MUFG
Derek Halpenny at MUFG notes that UK July CPI came in broadly as expected, with the headline rate rising to 2.9% mainly on higher utility bills, while services inflation eased.
The Bank of England's outlook for the British pound remained steady, with little change in expectations following the release of the July Consumer Price Index (CPI) and employment data. Derek Halpenny at MUFG noted that the July CPI rose to 2.9% from the previous 2.6%, driven by higher utility bills due to a 13% increase in the OFGEM price cap.
Services inflation, however, eased from 3.6% to 3.4%. The modest wage growth and weak employment demand suggested that the Bank of England is likely to remain divided in its decision-making, with future moves hinging on external factors such as Middle East-driven energy prices. If energy prices remain elevated, the Bank of England may be forced to hike interest rates by year-end. On the other hand, if energy prices fall, the Bank of England may hold off on hikes.
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