**As seen in Risk In The Week report 06/14/24, subscribe at cablefxm.co.uk/reports
Prices in the U.K. eased to 2.3% from the prior 3.2% Y/y, despite the sharp drop, the figure was above the consensus survey of 2.1%. The month-over-month print came in at 0.3%, slower than the prior 0.6% but faster than the 0.1% forecast. The April decline was largely due to a slowdown in electricity and gas bills, the component has contributed to the downside in headline prices for the last 7 months straight. Restaurants and hotels inflation continue to prove sticky, and the closely watched services CPI topped estimates by easing only a 10th of a percent to 5.9% Y/y. The fact that economists had seen prices slowing closer to the BoE's target pushed rate cut expectations further, as some desk chatter had brought a June cut to the table, April price data disappointed this call.
For this week, ING sees services inflation softening on base calendar effects, they expect headline CPI to dip below 2% and stay around this level into the end of the year. Strategists at UBS pushed their 25bps rate reduction call to August from June, they noted that the BoE had expected services CPI to slow to 5.5% in April, proving a major disappointment. Also, UBS thinks the MPC would rather wait until after the election and May price data to decide on rates.
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