British Pound: Data back Bank of England pause – Rabobank
Rabobank’s Senior Macro Strategist Bas van Geffen highlights that United Kingdom (UK) inflation matched expectations at 3.1% y/y, with higher energy and fuel prices driving the rise, while core and services Consumer Price Index (CPI) remained unchanged.
Rabobank's Senior Macro Strategist, Bas van Geffen, explains that UK inflation matched expectations at 3.1% year-on-year, with energy and fuel prices driving the increase. Core and services CPI remained unchanged. The bank argues that second-round effects appear to be contained, supporting the Bank of England (BoE) holding Bank Rate at 3.75% at their upcoming meeting.
Inflation, driven by higher energy and fuel costs, is the primary concern for the Monetary Policy Committee (MPC). Core CPI and services CPI have remained unchanged, with food CPI also falling short of expectations. Recent labor market data shows continued slack, and survey evidence suggests that selling price expectations are relatively muted.
These factors suggest that second-round risks are still contained. The market has adjusted its expectations for the BoE following today's inflation data, with the data supporting a hold at 3.75%. This rate is already significantly higher than economists' estimates of the UK's neutral rate.
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