22 March 2023
If you are covering the latest UK inflation data, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“Just as in the US, the path downwards for inflation is fraught with difficulties and will not be a smooth journey, with CPI coming in at 10.4%, rather than the expected single digits. Given the market movements of late, this puts the Bank of England in an incredibly difficult position as it may not be enough for the Bank of England to press pause on the rate hikes. The rhetoric from the BoE will continue to be that inflation is the primary concern, however, events in the banking sector have somewhat taken over and the Monetary Policy Committee has been seeing significant divisions on the best way forward. But with this inflation reading, the picture is incredibly clouded and the case for further rate hikes is strengthened.
“Given the pressure to pause lately, the BoE will have been hoping that rates at 4% will be enough. Just last week the Office for Budget Responsibility predicted inflation would be at 2.9% by the end of the year – a very steep drop off from the current level and an increasingly ambitious target following today’s print. How much the banking crisis will have changed this prediction remains to be seen, but it does feel a very punchy estimate.
“This has certainly been a unique set of circumstances that central banks have had to face. The fallout from the failures of Credit Suisse and Silicon Valley Bank only add to the complexity and make a policy mis-step all the more harder to avoid. The BoE may not be at the end of its interventions yet, and as has been seen in the US, inflation isn’t a simple thing to tame.”
