October 17, 2024 06:59 GMT
MNI Inflation and Labour Market Insight: October 2024 Release
We think markets have overstated the significance of the inflation and labour data; we look in detail at both releases.
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MNI (LONDON)
- We think that markets have overstated the significance of this week’s data. Given that a large part of the surprise was driven by air fares, inflation data is not as big a surprise as at first glance and underlying services only improved marginally this month.
- On the labour market data, regular private sector wages continue to move in the right direction and have already reached the BOE’s Q3 forecast a month early. The quantity side is still holding up better than survey data suggest - but the validity of the LFS data remains questionable at best.
- Overall, we don't think this data opens up a 50bp cut any time soon. We also don't think given the underlying drivers that it really opens up a more "activist" MPC (to use Bailey's words). We would only really view the data as moving in the right direction and making slow and steady progress on an underlying basis. However, sequential cuts are becoming more likely but, but we think that markets will probably continue to overreact in the short-term.
For the full document including detailed analysis of both the inflation and labour reports and a round up of sell side reactions see: MNI UK Inflation Labour Insight - October 2024 Release.pdf
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