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With An Inflation Rate Of 10.1%, the United Kingdom Defies Gravity

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Harvest Global Markets :

UK inflation report shifts the spotlight back to the Bank of England. This morning main focus was on the March UK CPI Report that was scheduled at 1100 HRS PKT. An annual inflation rate of 10.1%, combined with the most recent wage growth figures, favored the hawks.

Today’s inflation figures may compel the Bank of England to adopt a more hawkish monetary policy. The combination of persistent wage growth and high inflation may drive the doves to reassess their current stance. Therefore, following stronger-than-expected wage growth figures, sticky inflation could fuel bets on a 50-basis-point rate hike by the Bank of England in May.

A surprise increase in the PPI Input Index raises the prospect of a more hawkish BoE. The PPI Input Index increased by 0.2% in March, compared to a 0.3% decline predicted. Inflationary pressures and the need for more aggressive Bank of England policy moves would almost certainly have an impact on the UK economy. Prior to this week’s wage growth and inflation figures, sentiment towards the UK economy had improved. Investors should pay attention to Bank of England chatter after the UK Labor Market Overview (Tuesday) and inflation figures.

Catherine Mann, a member of the Monetary Policy Committee, has been scheduled to speak today. Investors, on the other hand, should stay tuned on media comments.

However, looking ahead to the US session, it is a quiet day on the US economic calendar. There are no economic indicators in the United States that can be influenced. The lack of statistics will allow Fed talk about monetary policy and the US economy to move the dial. We anticipate increased sensitivity to FOMC member commentary as markets react to guidance beyond May.

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