In light of recent comments from BoE Chief Economist Andy Haldane, today's UK inflation numbers are likely to attract significant interest. Much of the recent decline in the headline rate reflects the weakness in oil prices and aggressive supermarket discounting of food and alcohol. These influences, combined with some reductions in retail utility prices, are likely to have driven inflation lower in February, and underpin our forecast for annual CPI inflation dropping to 0.1% with RPI inflation slowing to 1.0%.
Similarly, the focus in the US today will be on the latest inflation print. The FOMC identified "a reasonable degree of confidence that inflation is set to rise towards its 2% target" as one of the factors that would be necessary for a decision to raise the policy rate. For February, we anticipate a repeat of January's -0.1% y/y print.
In contrast to the US, euro area activity indicators have been springing upside surprises during Q1. Flash PMI readings for March are expected to reaffirm a moderate strengthening of business activity and we forecast both the manufacturing and services indices for the euro area ticking up to 51.4 and 53.8 respectively.
