2023-05-24 07:39:43
[Bloomberg]- UK inflation remains far stronger than expected, with services and core prices posting their biggest gains in more than three decades, increasing pressure on the Bank of England to raise interest rates.
The UK’s consumer price index (CPI) rose 8.7% year-on-year in April, estimated at 8.2%, higher than all expectations among the 36 economists surveyed. Core inflation, which strips out volatile food and energy prices, rose 6.8 percent, up from 6.2 percent in March.
Although inflation fell to single digits for the first time in eight months, it will increase the pressure on the Bank of England to extend the interest rate hike cycle through the summer. “Given that inflation is more stubborn than the BoE expects, it is now almost certain that the BoE will raise interest rates from 4.50% to 4.75% in June, and then possibly further hikes in the following months, said Paul Dales, chief UK economist at Capital Economics.
Traders increased bets on further rate hikes by the Bank of England’s Monetary Policy Committee. They have fully priced in a 25 basis point rate hike at the next policy meeting, which means some are hedging a larger 50 basis point hike. GBP/USD extended gains after the data, rising 0.3% to 1.2448, rebounding from a one-month low hit on Tuesday.
“The MPC is putting more weight than usual on the data results, suggesting that another rate hike next month is likely,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
Original titleUK Inflation Exceeds All Estimates as Core Prices Surge (1)
—Co-reporting by Constantine Courcoulas.
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