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MNI UK Inflation Preview: February 2024

UK DATA
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  • Inflation is expected to continue to normalise across the major categories in February (albeit with some offsetting positive base effects from energy prices relative to those seen in January).
  • Analysts are generally split between both headline and services inflation printing in line with the BOE’s February MPR forecast or seeing a repeat of the 0.1ppt downside surprise to the Bank’s forecast seen last month.
  • We look in more detail at analyst expectations and outline the biggest expected drivers of the change in February as well as some potential sources of risk to consensus forecasts.
  • We don’t think that the majority of the MPC will need to see inflation undershoot the February MPR forecasts in order to begin cutting rates. The MNI Markets team continues to put more weight on the wage data, and do not think a quorum can be achieved to vote for the first cut until it has become more evident that Q1 and April wage data are showing more meaningful signs of slowing.
  • We think that a higher-than-expected inflation print (particularly for services CPI) would likely have a greater impact on delaying any possible BOE cuts than a lower-than-expected print could accelerate cuts. We therefore see asymmetry in potential market reactions – with a higher-than-expected print likely to have a larger market impact than a lower-than-expected print in our view.
For the full document including summaries of 18 sellside views see the full PDF here.
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  • Inflation is expected to continue to normalise across the major categories in February (albeit with some offsetting positive base effects from energy prices relative to those seen in January).
  • Analysts are generally split between both headline and services inflation printing in line with the BOE’s February MPR forecast or seeing a repeat of the 0.1ppt downside surprise to the Bank’s forecast seen last month.
  • We look in more detail at analyst expectations and outline the biggest expected drivers of the change in February as well as some potential sources of risk to consensus forecasts.
  • We don’t think that the majority of the MPC will need to see inflation undershoot the February MPR forecasts in order to begin cutting rates. The MNI Markets team continues to put more weight on the wage data, and do not think a quorum can be achieved to vote for the first cut until it has become more evident that Q1 and April wage data are showing more meaningful signs of slowing.
  • We think that a higher-than-expected inflation print (particularly for services CPI) would likely have a greater impact on delaying any possible BOE cuts than a lower-than-expected print could accelerate cuts. We therefore see asymmetry in potential market reactions – with a higher-than-expected print likely to have a larger market impact than a lower-than-expected print in our view.
For the full document including summaries of 18 sellside views see the full PDF here.