UK inflation above consensus will trigger market reaction
Will inflation in the UK ease below zero? That is the question the markets are asking today in connection with the publication of the April data. According to consensus prices are likely to have stagnated again yoy. Even…
Will inflation in the UK ease below zero? That is the question the markets are asking today in connection with the publication of the April data.
According to consensus prices are likely to have stagnated again yoy. Even though a result below consensus would not be a cause for joy it is unlikely to cause a panic reaction either, as the Bank of England (BoE) had already warned that inflation was likely to ease into negative territory.
The effect of the low oil and food prices would wear off towards year-end though allowing prices to rise more notably again then. A result above consensus on the other hand might cause a strong market reaction, as the debate about a first BoE rate hike had gathered momentum recently. The BoE is in a similar situation as many other central banks: the economy is doing well only inflation is not taking off.
Should consumer prices therefore record a surprise rise today markets are likely to bring forward rate hike expectations with Sterling gaining strong support, says Commerzbank.
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