LIVE MARKETS-A complicated picture for UK inflation
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A COMPLICATED PICTURE FOR UK INFLATION
A day remains until the Bank of England (BoE) reveals its next policy decision and markets are chewing over the latest UK inflation figures.
Consumer prices rose by 3.4%, slightly down from April's 3.5% reading - though earlier this month the ONS said April's reading had been overstated by 0.1% points.
"Whether the headline rate has fallen slightly or held steady, it’s still significantly above the Bank of England’s target of 2%," said AJ Bell head of financial analysis Danni Hewson.
The MPC is expected to hold rates steady on Thursday - though there are bets of about 10% on a cut, and Hewson says today's CPI shows there could be "wiggle room" for policymakers with both core inflation and service sector inflation having fallen.
Over at Berenberg though, the team does not see any rate cus on the horizon until 2026; they say today's print shows companies' ability to push costs onto their customers.
Andrew Wishart, Berenberg's senior UK economist flagged a drop in services inflation from 5.4% to 4.7%, though said 0.25% of that was due to the ONS correcting a mistake.
"The big picture remains that UK services inflation is proving more stubborn than that in other major economies due to policy-induced increases in labour costs," he wrote.
Market players also flagged a tetchy backdrop overhanging today's data, with escalating conflict in the Middle East driving up oil prices.
"The risk to energy prices has clearly intensified and moved up the agenda given developments in the Middle East," wrote Investec economists, also flagging the ongoing risk on U.S. tariffs on UK firms.
"It seems unlikely the MPC will want to change policy rates this week. But we think today’s data keep another rate cut at the subsequent MPC meeting in August firmly on the table."
(Lucy Raitano)
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FOR WEDNESDAY'S OTHER LIVE MARKETS POSTS:
WATCH OIL CLICK HERE
STOXX HOVERS AROUND FLAT, MIDEAST ESCALATION KEEPS MOOD TENSE CLICK HERE
EUROPE BEFORE THE BELL: SLIGHTLY HIGHER AS MIDDLE EAST TENSION FLARES CLICK HERE
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