2024-04-18 06:15:00 ET
Summary
- Services inflation is proving stickier than the Bank of England had hoped and markets are now pricing the first rate cut in November.
- That seems extreme given recent dovish comments from Governor Bailey but we think the latest data reduces the chances of a rate cut in May or June and we continue to expect the first move in August.
- Food inflation, having peaked close to 20% this time last year, is now at 4%, and we think it’ll be close to zero by the summer.
By James Smith
The Bank of England has pinned the timing of the first rate cut on wage growth and services inflation. The former came in hotter than expected in data released on Tuesday, and now the latest data on the latter has come in stickier than expected too. The result is that markets are now only full pricing the first rate cut in November....
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Sticky U.K. Services Inflation Pushes Back Rate Cut Hopes