Notably, the services CPI, a crucial indicator for the Bank of England (BoE), only decreased marginally from 6.1% to 6.0%, compared to the expected 5.8%.
This modest reduction in services inflation contrasts with the consensus and the BoE’s own projections. The persistence of high inflation rates in the services sector is critical for the central bank, which has been closely monitoring these figures for policy direction. The recent data suggests that the BoE may postpone the anticipated interest rate cut, with expectations now shifting to August, according to ING’s analysis.
The delay in the rate reduction is also supported by wage figures released on Tuesday, which were more tenacious than predicted. ING’s UK economist highlighted the significance of next month’s data, pointing out that April is traditionally a period for annual price increases across the UK’s service sector. These increments last year resulted in a considerable upward surprise in inflation rates.
The current situation, as analyzed by ING, indicates a divergence in monetary policy between the European Central Bank (ECB) and the BoE. This divergence is expected to influence the EUR/GBP exchange rate.
ING forecasts that the currency pair will likely remain nearer to 0.8500 rather than 0.8600 over the coming month, with the BoE’s cautious approach to rate cuts acting as a cap on potential movements.
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Source: Economy - investing.com
