18 September 2024
If you are covering the latest UK inflation data, please see the following comment from Richard Carter head of fixed interest research at Quilter Cheviot:
"Today’s inflation figures for August, which shows CPI has remained at 2.2% will likely bolster predictions that the Bank of England will hold rates as it prepares for its upcoming policy decision this week. The inflation data, which follows July's rate of 2.2% will unlikely cause the BoE to want to diverge from its current plans especially given core inflation rose by 3.6% in the 12 months to August, up from 3.3% in July. However, the US Federal Reserve, which is expected to deliver a potentially larger-than-anticipated rate cut this week, may play a part in fuelling speculation about the speed of further monetary easing across the world.
"While the US central bank is likely to cut rates by 0.25 or even 0.50 percentage points after its policy meeting on Wednesday, the Bank of England is more likely to take a cautious approach especially after today’s data. Despite recent data showing a stagnation in UK economic output and easing wage growth, core inflation remains sticky, with services inflation rising from 5.2% to 5.6% which will weigh heavily on the BoE’s decision-making. This complicates the central bank’s ability to justify further easing in the short term, especially when compared to the more aggressive stance of the Federal Reserve. The BoE’s quarter-point rate cut in August marked its first in over four years, but there is probably still a while yet until we get another cut.
"The MPC has already cautioned investors not to expect sequential rate cuts at every meeting given inflation is still not cemented at the 2% target and is likely to rise further as the year continues. Despite stagnating growth over the summer months there is not going to be a swift rate cutting cycle and will only ease pressure on the economy gradually."
