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Inflation data due at 7:00GMT

UK DATA
  • UK inflation data is due for release at 7:00GMT and will be key for the BOE's interest rate decision (which is due to be published tomorrow). Note that MPC members received pre-release access to this data on Monday at 9:30GMT, 60 minutes before the beginning of the MPC meeting.
  • Consensus expects a further fall in both headline and core. Headline is expected to fall from 10.1%Y/Y to 9.9%Y/Y (with a slightly negative skew, but with almost all forecasts in the 9.7% to 10.1% range). Core is expected to fall from 5.8%Y/Y to 5.7%Y/Y, albeit the skew here is positive with 10/25 analysts in the Bloomberg survey expecting core inflation to either remain at 5.8%Y/Y or rise.
  • We think that of the two core inflation will be the most important for the MPC, and think that it will probably be the services component that is even more pivotal here. Note Note that annual CPIH services fell from 5.8%Y/Y to 5.2%Y/Y in the January data (released last month).
  • We think if there is a further fall here it will be enough to see the 3 centrist MPC members (Bailey, Broadbent, Pill) vote to keep rates on hold while if this fall is reversed the MNI Markets team would expect to see a 25bp hike tomorrow.
  • At yesterday's close markets were pricing in around 14bp for tomorrow's meeting, around a 56% probability of a 25bp hike. With this in mind, we think there is a good chance we see a market reaction either way based on today's data.
  • For our the full MNI BOE Preview click here.
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