UK Annual Inflation Rate Jumps to 10.4% ahead of BoE Meeting

It was a busy start to the day on the UK economic calendar. The all-important CPI Report and UK annual inflation rate was in focus. The timing of the CPI Report created greater market interest. On Thursday, the Bank of England will deliver its March monetary policy decision.

The UK annual inflation rate unexpectedly accelerated from 10.1% to 10.4% in February. Economists forecast a rate of 9.9%.

According to the ONS,

• The Consumer Prices Index including owner occupiers’ housing costs (CPIH) jumped rose by 9.2% year-over-year in February versus 8.8% in January.
• Housing and household services (primarily electricity, gas, and other fuels) and food & non-alcoholic beverages pushed the CPIH higher.
• The CPIH increased by 1.0% in February versus a 0.7% rise in February 2022.
• Consumer prices increased by 1.1% compared with 0.8% in February 2022.
• Cafes, food, and clothing delivered the largest upward contributions to the monthly increase in the CPIH and the CPI rates.

Inflation remains a hot topic for central bankers. The latest round of numbers has reflected sticky inflation. The UK CPI Report raises the threat of more aggressive policy moves to tame inflation.

For the UK, the US, and the Eurozone, more aggressive interest rate trajectories could lead to hard landings. While hard landings are a concern for investors, central bankers are more focused on inflation.

GBP/USD Reaction to UK Annual Inflation Rate

Ahead of the UK CPI Report, the GBP/USD fell to an early low of $1.22059 before striking a pre-stat high of $1.22396.

However, in response to the CPI Report, the GBP/USD surged to a session high of $1.22631 before easing back.

This morning, the GBP/USD was up 0.27% to $1.22494.

Next Up

Away from the economic calendar, investors need to consider the latest on Brexit. Today, the UK Parliament will debate a motion to approve the draft Windsor Framework Regulations 2023. The markets expect British Prime Minister Rishi Sunak to win with the support of the Labour Party.

With inflation and Brexit in the spotlight, investors should also track Bank of England’s commentary. However, there are no Monetary Policy Committee Member speeches for investors to monitor.  Investors should track BoE member chatter with the media.

Looking ahead to the US session, it is a quiet day on the US economic calendar. There are no US economic indicators for investors to consider. The lack of economic indicators will leave Federal Reserve in focus.

There is uncertainty over whether the Fed will pause post-March or push beyond the previously projected 5.1% peak.