The
consumer
price
index
(CPI)
rose
3.4%
in
February
from
a
year
before,
having
increased
4.0%
annually
in
January,
according
to
new
data
from
the
Office
for
National
Statistics
on
Wednesday.
This
was
below
forecasts
for
a
3.6%
rise
and
increases
pressure
on
the
Bank
to
ease
monetary
policy,
even
as
CPI
remains
above
the
2%
inflation
target
–
although
way
below
the
11.1%
peak
seen
in
October
2022.
“Energy
was
a
key
upward
contributor
to
the
move
in
year-on-year
CPI
inflation
in
February,
due
to
transport
fuel,”
says
Melanie
Baker,
senior
economist
at
Royal
London
Asset
Management.
“Offsetting
this,
though,
there
were
large
downside
contributions
to
inflation
in
February
from
food
and
restaurants
and
cafes,
apparently
largely
driven
by
alcohol.”
Services
Inflation
Slowing
The
Bank
of
England,
ahead
of
possible
rate
cuts
this
year,
remains
worried
about
wage
growth
and
services
sector
inflation.
But
RLAM’s
Baker
notes
there
are
some
positive
trends
in
this
month’s
ONS
dataset.
“In
terms
of
key
indicators
of
underlying
inflation
pressure
or
domestically
driven
inflation,
things
were
also
more
encouraging
than
last
month,”
she
says.
“Services
inflation
clearly
remains
at
very
high
levels
but,
except
for
housing
services,
where
rental
inflation
picked
up,
the
main
categories
of
services
inflation
all
slowed
at
least
a
bit.”
On
a
monthly
basis,
CPI
rose
by
0.6%,
below
the
0.7%
seen
in
January.
The
retail
price
index
(RPI),
rose
by
4.5%
annually
in
February,
following
a
4.9%
rise
in
January,
in
line
with
forecasts.
Will
the
Bank
of
England
Now
Cut
Rates?
A
better-than-expected
inflation
print,
even
though
it’s
only
over
one
month,
will
heighten
the
clamour
for
rate
cuts.
At
the
end
of
last
year,
economists
predicted
the
Bank
would
start
reversing
its
substantial
rate
hikes
as
early
as
March.
But
markets
are
now
pricing
in
rate
cuts
for
the
BoE,
Federal
Reserve,
and
European
Central
Bank
in
June.
The
Federal
Reserve
decision
is
scheduled
for
tonight.
We
rounded
up
some
expert
commentary
on
the
likely
impact
of
today’s
data
on
UK
rates.
Zara
Nokes,
global
market
analyst,
J.P.
Morgan
Asset
Management
“The
Bank
will
[keep]
a
watchful
eye
on
the
medium-term
inflation
outlook,
particularly
the
domestically-generated
inflation
originating
from
the
services
sector.
“With
regular
wage
growth
north
of
6%
and
services
inflation
still
running
hot,
the
Bank
will
need
further
evidence
that
domestic
price
pressures
are
cooling
before
it
begins
cutting
rates.”
Melanie
Baker,
senior
economist,
RLAM
“Many
of
the
major
central
banks
at
this
stage
seem
to
want
more
confidence
and
more
evidence
that
inflation
is
on
track
to
sustainably
hit
inflation
targets
before
starting
to
cut
rates.
“As
far
as
it
goes,
today’s
data
should
be
modestly
encouraging
from
a
Bank
of
England
perspective:
headline
CPI
was
a
tenth
below
the
staff
forecast
from
February’s
Monetary
Policy
Report
and
services
inflation
was
in
line
with
the
staff
forecast.”
Neil
Birrell,
chief
investment
officer,
Premier
Miton
Investors,
and
lead
fund
manager,
Premier
Miton
Diversified
Funds
“This
won’t
be
enough
for
a
cut
in
interest
rates
in
the
very
short
term
but
does
give
backing
to
the
view
that
the
UK
economy
is
performing.
Rate
cut
expectations
for
the
middle
of
the
year
are
well
founded.”
Kathleen
Brooks,
research
director,
XTB
“This
does
not
shift
the
dial
for
Thursday’s
BoE
meeting,
in
our
view,
and
we
expect
the
BoE
to
continue
to
signal
that
the
war
on
inflation
is
not
yet
over.
The
Bank
needs
to
see
more
evidence
on
the
outlook
for
price
growth
before
rates
can
be
cut.
“However,
this
does
shift
the
dial
for
the
Bank’s
May
meeting,
where
we
expect
to
get
an
update
on
the
timing
of
rate
cuts.”
Charles
Hepworth,
investment
director,
GAM
Investments
“This
disinflationary
tailwind
will
encourage
market
expectations
of
rate
cuts
coming
this
summer
and
market
forecasts
expect
three
0.25%
cuts
for
the
year
in
total.
This
is
likely
the
best
a
government
pushing
for
an
autumn
election
could
hope
for.”
Steve Matthews,
investment
director,
liquidity,
Canada
Life
Asset
Management:
“After
today’s
data,
attention
now
turns
to
the
BoE
committee’s
remaining
two
hawks –
Jonathan
Haskel
and
Catherine
Mann –
who
voted
for
a
rate
hike
in
February.
The
fall
to
3.4%
might
alleviate
some
concerns, leading
Haskel
or
Mann
to
shift
to
hold
at
tomorrow’s
committee
meeting
and
signalling
that
a
June
cut
could
be
on
the
cards.
“They
will,
however,
still be
wary
of
the
9.8%
National
Living
Wage
rise
coming
into
force
in
April
and
the
potential
this
may
feed
inflation. Our
view
remains
a
first
cut
of
25bps
in
August
is
still
the
most
likely
scenario.”
Stephen
Payne,
portfolio
manager,
Janus
Henderson
“Sticky
services
inflation
may
give
the
MPC
pause
for
thought
though,
so
I
expect
market
reaction
to
be
muted,
with
the
timing
expectation
for
rate
cuts
most
likely
little
changed.”
Rachel
Winter,
partner,
Killik
&
Co
“Although
it
is
not
expected
that
the
Bank
of
England
will
cut
rates
when
it
meets
tomorrow,
the
fall
in
inflation
should
encourage
it
to
start
doing
so
later
this
year,
which
should
be
good
news
for
stocks,
bonds,
and
property.”
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