DAVY VIEW

This morning’s CPI inflation release at 9.4% in June, up from 9.1% in May, will encourage the view that the peak will be close to 11-12% during the winter as energy prices rise. Also, the UK now faces a particularly pernicious inflation problem due to Brexit, evident in the tight labour market and acute supply-chain issues. Overnight, Bank of England Governor Andrew Bailey said a 50bp interest rate hike is on the table for the August 4th policy meeting, validating market expectations.