UK CPI: BoE will ignore today’s higher-than-expected numbers – Danske
By FXStreet FXStreet (Córdoba) – Today, United Kingdom CPI data showed that the index rose 0.2% y/y and the core rate 1.4%, to the highest level since January 2015. According to analysts from Danske Bank, today numbers are not a sign of higher underlying inflationary pressure because most of the raise was due to volatile components.
Key Quotes:
“However, today’s release is not a sign of higher underlying inflationary pressure as inflation was mainly pushed up by volatile components. Air fares surged by 46% m/m from November to December, the highest since 2002, which alone pushed CPI inflation up by 0.14pp.”
“So, for now, we think the Bank of England (BoE) will just ignore today’s higher-than-expected CPI core inflation print. Although CPI core inflation has been trending slightly up since June 2015, we believe the BoE would like solid proof that core inflation is increasing.”
“We continue to expect CPI inflation and CPI core inflation to stay subdued at least until H2 16. Much depends on the oil price”
“Our main scenario is that the BoE will increase the Bank Rate for the first time in Q2 16, probably in May. However, we recognise the BoE sounds increasingly less ‘Fed light’ despite the strong employment …read more
Source:: FX Street
