RPT--🇬🇧❗️Cable FX Macro Weekly Note: U.K. January Consumer Prices

**As seen in Risk In The Week report 02/09/24, subscribe at cablefxm.co.uk/reports

U.K. consumer prices rebounded in December, the headline rose 4.0% Y/y vs the prior 3.9% and the consensus forecast of 3.8%. Services inflation ticked faster at 6.4% Y/y, the metric surprised economists’ median estimate of 6.1%. Since the release, we have seen swap traders trim BoE rate cut bets, the market is currently pricing 78bps of rate cuts for this year compared to 114bps for the ECB. The latest BoE monetary policy decision saw rates stay unchanged while the statement dropped the line where the MPC saw the need for further tightening. However, the BoE said it needed evidence before it plans to lower rates.

The desk at UBS is out of consensus and sees the BoE slashing rates by 100bps this year and 175bps in 2025, they noted that the market does not fully price in a rate cut until June (vs their call of 25bps rate cut in May). UBS saw upside risks to their U.K. inflation forecast which could push their rate reduction projection to August. Economists at ING pencil U.K. CPI averaging 4.1% over 1Q, Societe Generale and Deutsche Bank see prices rising by 3.8% in the first three months of 2024.