MNI UK Inflation and Labour Preview - January 2024 Release

• Wage data is due on Tuesday and consensus expectations look for private sector AWE ex bonus to fall notably in the 3-months to November to 6.6%Y/Y.
• The median of the previews that we have read look for a fall in headline CPI of 0.1ppt to 3.8% with core inflation 2 tenths lower at 4.9%Y/Y and services inflation 3 tenths lower at 6.0% (although the mean here is for 6.07%). This would be a considerable undershoot compared to the Bank of England’s November MPR forecasts which expected headline CPI at 4.58%Y/Y and services inflation at 6.86%Y/Y. Indeed, the undershoot for both if in line with expectations would be around 0.8ppt.
• We had noted that it would be hard for markets to price in more than around 140bp of cuts for 2024 as a whole – and that seems to be the limit for the market at the moment. At the time of writing we are pricing around 132bp and (absent any surprises from Fed speakers or Bailey) think that we could challenge the 140bp level again this week on soft level. However, we would again see this as stretched positioning, and a good opportunity to fade more extreme pricing of cuts.
• We also review notable sellside comments following the GDP report last week.

UK_Data_Preview_2024_01_Release.pdf