UK CPI inflation data this week could sway market view on rates
Currently market expectations are split on whether the Bank of England will cut rates from 5.25% at the June 20th policy meeting. However, this week’s UK CPI release should show inflation in April falling close to, or even slightly below, the Monetary Policy Committee’s (MPC) 2% target. Of course, this will reflect negative contributions from energy and food, but with core CPI inflation expected to come in at 3.6%. Nonetheless, the evidence in recent weeks that UK jobs growth is faltering, following the technical recession in H2 2023, may convince the MPC to cut rates in June. The number of pay-rolled employees was 30.15 million in April, up just 0.5% on the year, the softest pace of growth since the pandemic. Also, the ratio of numbers unemployed (1,468,000) to vacancies (898,000) at 1.6x is now back at pre-pandemic levels, demonstrating the loosening of labour market conditions over the past year.
Please download the document in full below.