UK Inflation, Jobs and BoE in Focus

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UK Inflation, Jobs and BoE

The week ahead turns out to be a busy one with UK inflation, jobs and BoE coming into focus. According to the median estimates, UK’s inflation rate is expected to rise at a slower pace of 2.8% for the month of February.

This marks a slower pace of increase compared to the 3.0% increase seen in January. Core inflation rate is forecast to rise at a slower pace of just 2.5% for February compared to January’s 2.7% increase.

Consumer prices in the UK have been tipped to have posted a peak around 3.0% and are expected to average around 2.5% by the second quarter of this year. A decline in the consumer prices could potentially confirm this view. The inflation report will be released today at 09:30 GMT.

Later in the week, on Wednesday the jobs report data will be coming out. The UK’s unemployment rate is expected to remain steady at 4.4% for the period. Previously, the unemployment rate was seen rising from 4.3% to 4.4%. The increase in the unemployment rate came against the backdrop of a number of people being unemployed rising at the fastest pace in five years.

The increase in the unemployment rate was attributed to a number of young people under the age of 24 being out of work.

Further job losses could increase especially as more firms in the financial sector look to relocate back to mainland Europe. Adding to this, the bankruptcy of the U.S. toy maker Toys-R-Us which is expected to also shut its stores in the UK could further accelerate the number of people out of jobs.

Wage growth will of course remain key amid a slowing inflation rate.

UK Inflation expectations stand at 2.9%

A week ago, a survey conducted by the Bank of England showed that the UK public expected inflation to hold steady for the next few years but although above the BoE’s 2% inflation target rate.

The survey conducted in February, the public expectations for inflation for the year ahead showed a 2.9% expectation in consumer prices for 2019 and 2020. The inflation expectations were barely changed from the previous survey conducted in November. However, five year expectations on inflation were seen rising to 3.5%.

The survey indicated that based on public opinion, inflation is expected to remain around the 3% threshold. In a previous communication, the BoE’s inflation report showed that headline consumer prices would peak in the first quarter of this year and remain steady above 2% over the next three years.

Bank of England expected to keep rates steady.

The Bank of England’s monetary policy meeting will be the main event risk this week as the upcoming data that includes inflation and the unemployment rate alongside wage growth could be considered. No changes are expected at this week’s meeting.

The Bank of England is expected to hold interest rates steady at 0.50%, but could maintain its forecast of hiking interest rates by May this year.

BoE to signal a rate hike in May?

The central bank is expected to hike interest rates in May this year. The speculation comes amid the central bank announcing at its previous meeting that interest rates could rise faster than expected. However, a lot of this will remain hanging on how the Brexit deal is negotiated.

If the UK manages to negotiate a transitory deal, the BoE’s rate hike in May looks quite possible. But given the current roadblocks and the tough stance from EU officials, this is unlikely to happen. Following the May milestone, the next monetary policy meeting where the BoE could hike rates is the month of August.

For the moment, investors will be looking to this week’s BoE meeting for any further evidence of whether the central bank will maintain its previous hawkish forward guidance.

With the UK Inflation, Jobs and BoE scheduled for the week, it promises to be a particularly active time for the GBP.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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