DAVY VIEW

This morning’s Consumer Price Index (CPI) data showing inflation accelerating to 10.4% is disappointing, ahead of expectations for a fall to 9.9%. Forecasts may have been caught out by the sharp 2% rise in food prices and rebound in clothing and furniture prices after January discounts. However, services price inflation also accelerated to 6.6%. This will concern the Bank of England, pay growth is feeding persistent price pressures. The CPI data could tip the balance towards a 25bp rate hike to 4.25% at tomorrow’s policy meeting.