MNI UK Inflation Insight: April 2024

• There was a notable upside surprise to April CPI against both BOE and analyst forecasts.
• Services CPI came in at 5.9% (BOE forecast 5.52%, MNI median 5.47%, Bloomberg consensus 5.4%, prior 6.0%). This was a particularly important print as a number of services prices see their annual increase in April 2024 and looking at these data, it appears as though services inflation is stickier than the Bank of England had expected.
• The MNI Markets team therefore now think that there is around a 10% probability of a June cut (a bit higher than the market expectation), see a 40% probability of an August cut, a 30% probability of a September cut and a 20% probability that the first cut is delayed further.
• The May CPI release in our view has taken on additional importance as there should be less potential one-off impacts in the data. If restaurant and accommodation prices remain high in May – there would be no chance that could be attributed to Easter effects any longer and hence it would strongly suggest there is more persistence than the MPC had expected – and if that is the case, it would make an August cut increasingly unlikely. We look through the detailed drivers in the document.
• We also note that 7 sellside analysts no longer look for a June cut after this data release . These view changes are summarised on page 3 in the document with detailed inflation reaction summaries from 17 sellside analysts.

MNI UK Inflation Insight -May 2024 Release.pdf