🇬🇧Cable FX Macro Weekly Note: U.K. March CPI

**As seen in Risk In The Week report 04/14/23, subscribe at cablefxm.co.uk/reports Inflation in the U.K. remains above the double-digit pace, February CPI increased by 10.4% Y/y, this was above the market expectation of 9.9% and the prior 10.1%. The ex- food and energy metric accelerated to 6.2% Y/y, above the survey median of 5.7%. Food prices jumped by 2.1% M/m vs the prior 0.6%, this was the largest monthly increase since July. Housing prices eased to 0.2% M/m from a prior 0.4%, transport prices rebounded to 0.7%. The report came to recalibrate rate tightening expectations as the February core figure topped the highest of the forecasts in the range. Implied policy rates were lifted since the February inflation figures, 6 month tenor is now 33 basis points higher than before the release. Markets price in the BoE lifting the Bank Rate further and expect a peak of around 4.7%. Expectations of central bank tightening slipped on the back of the banking crisis in March, however, after the February CPI upside surprise, MUFG said this would support further moves from the BoE and that it should ignore the recent market turmoil. The desk warned that the March metric should print a decline in between 0.3%-0.4% M/m for prices not to overshoot the BoE’s Q1 CPI projection. Overnight index swaps price in around 50bps of tightening by September, however, the same amount of rate cuts are seen from the peak to March of next year.