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Inflation data due at 7:00BST

UK DATA
  • There has been an upside surprise to the Bloomberg consensus for each of the last six headline CPI prints (starting with the October 2021 print which was released in November).
  • The Bank of England has consistently underestimated the rise in inflation and an as-expected outcome would be broadly in line with the Bank’s forecasts. According to minutes of the May Monetary Policy meeting, CPI is likely to top 9% in the second quarter, before “averaging slightly over 10%” in the closing months of the year.
  • Note that this will be the final CPI print ahead of the June MPC meeting. The MPC decision will be announced on 16 June while the next inflation print will be released the following week on 21 June.
  • After yesterday's moves we estimate there is about a 75% probability priced into markets that one of the next three MPC meetings will see a 50bp hike. To us this seems stretched and that if we saw a downward surprise in inflation we would see a bigger move in markets than another upside surprise.
  • As with yesterday's labour market data, we would expect any reaction in the pound to be boosted at 7:30BST when UK STIR markets open.
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