GBP: Positive CPI Surprise Would Alter BoEs Trade-off In Favour Of Tightening - ING

Published date: .


UK CPI inflation is expected to come in at 3.0% YoY today – and just within the +/-1% tolerable band around the 2.0% target – meaning that Governor Carney won't be required to attach an additional letter to the Xmas card that he will be sending the Chancellor this month, according to Viraj Patel, Research Analyst at ING.

Key Quotes

“The consensus is that inflation is set to peak and slowly return back towards 2.0% as the post-Brexit GBP depreciation shock wares away. However, any positive surprises over the coming months – or signs of inflationary persistence – would alter the Bank's growth-inflation trade-off in favour of further tightening. In this scenario, calls for a second rate hike in May-18 could gain traction – and this hawkish front-end re-pricing in the UK curve is what we see as the catalyst to take GBP/$ beyond 1.36 at the turn of the year.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.