UK Inflation Continues To Rise
Headline UK CPI rose by 9.1% YoY in May, higher than the previous month’s 40-year high of 9% and in line with the consensus expectations. The core inflation print, however, fell 0.3pp MoM, to 5.9%, slightly below consensus expectations. <br> <br> <br> <br> Following the release of the UK May yearly inflation rate report, the pound weakened, with the GBP/USD dropping 0.29% and the GBP/EUR dropping 0.38%. <br> <br> No doubt that the inflation rate data will help to support the position from the Bank of England (BoE) that the UK future economic outlook is looking bleak and will need to be addressed through interest rate increases. <br> <br> With the BoE expecting inflation to reach 11% in October, I expect the UK’s central bank to start entering the 50bps interest rate hikes from August, and to carry on hiking interest rates from September onwards. The magnitude of hikes from September onwards will be very much data dependent on the cost of living, inflation, employment, and growth expectations. With food and fuel prices still rising, an increase in the Ofgem energy price caps limit coming in Q4, and consumer confidence currently at a record-low, I also expect to see inflation continue to rise between now and year-end. <br> <br> About the Author <br> <a href="https://www.linkedin.com/in/alexander-huyberechts-651361131/" target="_blank">Alex Huyberechts</a> is a Market Analyst at Caxton, focused on G10 FX.