Inflation crashed through Government Target
The MPC’s forecast that inflation in U.K. would peak at 2.8% appears in tatters this morning following the release of producer and consumer price data.
The pound rose by 1% following the news to a high of 1.2460. The possibility of a hike in rates has risen significantly and will underpin the pound as we move towards the start of Brexit negotiations.
Inflation in February rose to 2.3% in February following a 1.8% read in January. The rise in producer prices, the factory gate cost of raw materials, rose by 19.5% slightly less than January’s 20.5 increase.
This warns of further inflation down the road as the fall in the value of the pound after the Brexit vote continues to feed into the economy.
Last week’s MPC decision to wait and see looks vulnerable now and the single dissenter, Kristin Forbes concerns about the BoE falling behind the curve look justified.
On Thursday, we see the release of retail sales data and should the price data have had an adverse effect on consumers spending then serious questions are likely to be asked.