UK CPI inflation data beating market expectations


The pound edged higher on Tuesday morning after the release of CPI inflation data that beat expectations in February and raised the prospects of further Bank of England interest rate rises in the months ahead.

Inflation rose year-on-year to 10.4% in February, higher than a previous reading of 10.1% and beating market expectations of 9.9%. Inflation month-on-month rose to 1.1% and was almost double than the 0.6% the market was expecting.

Core inflation, which the BoE is particularly interested in, surged 6.2% year-on-year in February, surpassing the 5.7% the market was projecting and January’s reading of 5.8%.

Recently the BoE have stated that they expect inflation to fall rapidly this year but the current inflation data reading shows inflation is still close to peak levels, this could change the tune of the central bank moving forward.

Sterling could gain further if a hawkish message from the BoE is released tomorrow. We are expecting to see a 25 basis points interest rates rise, but following commentary will be key for the pound. Hints at further rate hikes to cool inflation could see the pound rally.

Key announcements

07:00 – GBP – CPI Y/Y – Actual 10.4% from previous 10.1%
07:00 – GBP – Core CPI Y/Y – Actual 6.2% from previous 5.8%
08:45 – EUR – ECB President Lagarde speaks
18:00 – USD – FED policy rate decision
18:30 – USD – FOMC Press conference