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UK CPI Preview Data Due at 7:00BST

UK DATA
  • The MNI Markets team thinks that with the Bank of England very likely to keep rates on hold on Thursday and maintain consistent guidance, that the biggest UK event this week is the release of May CPI.
  • The median of the analyst previews that we have read (and the Bloomberg consensus) looks for services CPI in May to fall to 5.5%Y/Y (mean 5.52%Y/Y), still notably above the BOE’s forecast of 5.26%. We do note, however, that 7/17 of the previews that we read look for services CPI to surprise to the upside to 1dp, with six looking for 5.6%Y/Y while Santander looks for 5.7%Y/Y. In terms of rounding down to less than 5.5%Y/Y, Morgan Stanley looks for 5.43%Y/Y while ING looks for 5.2%Y/Y.
  • The MNI Markets team thinks that there are two-way risks to the services CPI print, but in our view downside risks outweigh upside risks.
  • The analyst previews that we have read at 3.5%Y/Y for core CPI (in line with the Bloomberg consensus) but note that there is a downside skew.
  • Consensus sees headline CPI at 2.0%Y/Y with marginal upside risks – indeed the mean from the analyst previews that we have read is at 2.03%Y/Y – which is 0.09ppt higher than the BOE’s May MPR forecast (for reference the BOE’s April forecast was 2.06%Y/Y with a 2.33%Y/Y outturn).
  • If we are right and services CPI surprises consensus to the downside (but is still at least in line with or a little higher than the BOE May MPR forecast) then we would expect to see markets price in a greater than 50% probability of an August cut and to at least move towards fully pricing two 25bp cuts this year.
  • In contrast if services CPI comes in at 5.6%Y/Y, we would expect to see markets move further against cuts this year. But it would probably need a print of at least 5.7%Y/Y or 5.8%Y/Y to look to change the BOE’s guidance in this week’s meeting.
For the full MNI UK CPI Preview including summaries of over 20 sellside analysts' views click here.
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