HYCM Executive Comments on Hot UK CPI – “the Tide is not turning yet”

The UK delivered some unwanted news today as inflation delivered a number that was hotter than anticipated – bucking a recent downward trend.

The UK Office of National Statistics reported that the consumer price index (CPI) increased by an annual 10.4%. This was above expectations of 9.9% and an increase from January when CPI was reported at 10.1%. Month to month, CPI was reported at 1.1% – again topinng expectations of 0.6%.

For market watchers, this is not good news and the Bank of England is meeting soon with an

Giles Coghlan, Chief Market Analyst, consulting for HYCM – a Forex broker, distributed a comment on the inflation report:

“Unfortunately, the tide does not yet appear to be turning on inflation, as today’s annual CPI figures have come in hotter than expected, exceeding City analysts’ maximum forecasts at 10.4%. Worryingly, the core inflation moves back up to 6.2% despite expectations of a fall, signalling that the disinflationary process has yet to begin in the UK. Expect todays figures to fuel market tensions. Although there has been some debate that recent fears of banking contagion could see the Bank of England pausing its rate hiking cycle entirely, today’s figures complicate matters, adding pressure for the central bank to hike rates again despite wider concerns about the economy. With the Federal Reserve due to meet this evening at 18:00, central bank watchers can now expect sticky inflation figures to feed into the BoE’s decision-making. Currently, a 25 basis point hike is cautiously anticipated by the markets, where a 62% chance of a BoE hike is now expected tomorrow.”

Later today (March 22, 2023), the US Federal Reserve will announce its decision on benchmark rates. Currently, the market is predicting a 25 bps hike but in lieu of the banking crisis, some observers are calling for the Fed to pause and wait, providing more time for banks to assess their situation while providing more time for markets to settle.

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