DAVY VIEW

This morning’s UK inflation data are mildly hawkish, as were the labour market figures already published this week. However, the big picture remains that there is still very limited evidence of second-round effects of the energy price increase. While a Bank Rate hike at next week’s monetary policy meeting is now a certainty, we see limited need for Bank Rate to remain at or above 4% over the medium term given the UK economy’s fundamentals.