UK Inflation Comes in at 10.1%, BoE to Take Action?
UK CPI inflation remained in double digits (10.1% year-on-year) in March although economists had forecast a drop to 9.8%.
The Office for National Statistics (ONS) announced that core CPI came in at 6.2%, on an annualised basis, unchanged compared to February and slightly higher (+0.2%) than anticipated.
The elevated inflation figures boosted the British Pound on Wednesday morning as investors and traders believe that further monetary policy tightening may be on the way.
BoE to hike interest rates?
Some market analysts suggest that the unexpected double-digit headline inflation figure could force the Bank of England (BoE) to raise borrowing costs once again.
A report by the EY ITEM Club said: “The fact that this follows the latest labour market data, which showed healthy jobs growth and a surprise pickup in private sector wage rises, and a stronger-than-expected performance from the economy, will probably tip the balance towards another rate rise next month.”
New Zealand Q1 2023 CPI inflation
Statistics New Zealand will publish the first quarter’s inflation figures on April 20th. Economists suggest that CPI inflation will come in at 7.1% on a yearly basis and 1.7% on a quarter-to-quarter basis.
Market analysts believe that harsh weather conditions and high food prices could keep inflation close to the 7.2% figure recorded in the last quarter of 2022.
Treasury economists noted in a report that New Zealand’s inflation could be roughly divided into thirds: One-third comes from excessive demand caused by government spending and low-interest rates, another third comes from supply shocks from overseas, and another third is unknown.
PBoC Interest rate decision
On Thursday, the People's Bank of China (PBoC) is expected to announce its decision on interest rates. Economists forecast that its governing board will likely keep interest rates unchanged. On Monday, China’s central bank kept the 1Y Medium-term Lending Facility (MLF) rate unchanged at 2.75%.
ING analysts wrote in a report that “the action signals that the PBoC is not particularly worried about the recovery of the Chinese economy. This should provide some relief to the market, which will now expect the GDP report for 1Q23 to be in line with expectations. The consensus view is for GDP growth of 4.0%YoY (ING f 3.8%YoY).”
The Dutch bank’s analysts suggested that “consequently, we expect the PBoC to keep interest rates unchanged. It is unlikely that the central bank will hike when the economy has still not fully recovered. And rate cuts are still possible if the recovery runs slower than required.”
UK retail sales in March
The Office for National Statistics (ONS) will publish data regarding UK retail sales in March. Economists forecast a 3.1% drop on an annualised basis and a 0.5% fall on a month-to-month basis.
According to the latest study released by KPMG and the British Retail Consortium (BRC), total retail sales rose by 5.1% in March, compared to 3.1% in March 2022, above the three-month average of 4.8%. Economists noted that Mother’s Day shopping offered a minor lift.
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