DAVY VIEW

Markets have pared back their bets that the Bank of England will raise interest rates tomorrow (September 21st), sterling is under pressure, following this morning’s CPI inflation data showing a surprise fall to 6.7% in August. Specifically, core inflation fell sharply to 6.2%. However, with total pay growth accelerating to 8.5% in July, ahead of the Bank’s forecasts, we still believe that the Monetary Policy Committee (MPC) is more likely than not to follow through with a 25bp rate hike to 5.5%.