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Apr 18, 2018

Inflation sinks to one-year low to ease pressure on Bank of England to raise rates. April 18, 2018.

Inflation sinks to one-year low to ease pressure on Bank of England to raise rates

Tom Rees 18 April 2018 • 10:20am

Inflation drop reaction: Markets concluded too hastily that May hike is done deal

Two Bank of England policymakers voted for a rate rise at month's meeting and markets had expected the seven others to follow suit in May.
Has today's shock drop in inflation significantly altered the mathematics at the central bank?
"Inflation has undershot the MPC’s forecast, 2.8%, again, suggesting that investors have concluded too hastily that a May rate hike is a done deal," argued Pantheon Macro's Samuel Tombs.
He added:
"Looking ahead, we continue to expect CPI inflation to fall sharply and to average just 2.1% in Q4, well below the MPC’s 2.4% forecast.  The MPC’s forecasts assume that import prices will rise further this year and that pass-through from sterling’s 2016 depreciation to consumer prices will be only slightly less pronounced than last year."

Inflation drop reaction: May rate hike will now be 'a close run thing'

Today's surprise inflation drop is "likely to make a rate hike in May a close run thing" but it is still "more likely than not", according to Paul Hollingsworth at Capital Economics.
The fall may not be enough to derail an interest rate hike at next month's Bank of England meeting but undoubtedly weakens the case to raise rates once or even twice more in 2018.
If wage growth maintained its momentum in March, today's pullback in inflation would mean that real wage growth increased further last month, easing the pay squeeze on UK consumers.

Inflation drops to one-year low - key takeways

  • UK inflation dropped to a one-year low in March, easing the strain on British household incomes.
  • Pound sinks 0.7pc against the dollar to below $1.42 as steep drop in CPI weakens case for faster pace to Bank of England's interest rate rises.
  • CPI has now fallen from 3pc to 2.5pc in just two months.
  • Clothing, alcohol and tobacco prices rising less than they did a year ago put downward pressure on inflation, according to the ONS.

Inflation sinking to one-year low eases pressure on Bank of England to raise rates

UK inflation continued its steep descent in March, dropping much faster than economists had expected to 2.5pc.
CPI fell to its lowest level in a year to dampen hawkish calls for the Bank of England to accelerate the pace of rate rises. Sterling is slipping further on currency markets following the release, dipping 0.5pc against the dollar to $1.4212. More to follow...

Pound nudges down ahead of inflation figures

The pound has nudged down on currency markets ahead of this morning's UK inflation figures, slipping further away from its post-Brexit vote high hit yesterday.
After seven straight days gaining against the dollar, it finally dipped yesterday after wage growth figures missed economists' forecasts. What would help it rebound this morning?
A surprise climb in inflation bolstering the case for the Bank of England to accelerate its interest rate hiking cycle would lift sterling against its rivals.

Hammerson ditches £3.4bn Intu takeover blaming high street slowdown

Hammerson owns Birmingham's Bullring
Hammerson has dropped its £3.4bn takeover offer for fellow shopping centre giant Intu after pressure from shareholders amid torrid trading on Britain’s high street.
The property firm, which owns Birmingham’s Bullring centre, said it had taken the decision after a wave of company voluntary agreement (CVAs) insolvency deals by retailers looking to cut their rent bills.
But Intu, whose properties include Manchester’s Arndale centre, attacked Hammerson’s rationale for pulling out of the deal as "unsatisfactory" after it reaffirmed its support for the takeover as recently as March 19.
Read Jack Torrance's full report here

Agenda: Global stocks climb as markets brace for UK and eurozone inflation data

Strong trading in the US boosted Asian and European stocks
Global stocks have been boosted by an expectations-beating earnings season in the US lifting market sentiment.
Investors have shaken off geopolitical and trade war jitters after a string of corporate heavyweights in the States beat Wall Street estimates in their latest earnings. Strong trading in the US last night spilled over into Asia and Europe with the FTSE 100 climbing 0.3pc in early trade.
Elsewhere, the pound is stuck in flat territory as currency markets brace for UK and eurozone inflation figures. Economists expect sticky UK CPI to remain elevated at 2.7pc ahead of the Bank of England's key meeting next month while inflation in the eurozone is set to continue to remain subdued.
Shopping centre owner Hammerson has pulled out of its £3.5bn takeover of rival Intu Properties. The Birmingham Bullring owner blamed the UK high street's struggles for dropping the deal which has faced shareholder resistance since being announced in December.
Trading statement: BHP Billiton, Bunzl, Countryside Properties, Hochschild Mining, Jupiter Fund Management, Mediclinic, Moneysupermarket, Polymetal, RELX, Segro,
AGM: Bunzl
Economics: Inflation figures (UK), House price index (UK), Federal Reserve Beige Book (US), CPI (EU), Car registrations (EU), Construction output (EU)

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