Commenting on today’s Consumer Price Inflation fall to 3.4% and tomorrow’s Bank of England interest rate announcement, Chris Arcari, Head of Capital Markets, Hymans Robertson, said:

“Headline CPI fell more than expected to 3.4% in February, its lowest level since September 2021. Indeed, it is expected to fall further in 2024, with consensus forecasts expecting inflation to dip below the 2% target in late spring and early summer, but at a slower pace than in 2023. Falls in energy and goods and food price disinflation – large detractors from headline inflation over 2023 – have largely run their course.

“Service-sector price and wage growth – two closely watched measures by the BoE – have started to ease, albeit from high levels, which is a good sign for core inflation. But elevated service-sector and wage inflation are signs of genuine domestic price pressures, and still too hot for the Bank of England’s Monetary Policy Committee (MPC) to justify an interest rate cut just yet, even if against a weak real growth backdrop. The Bank will tread cautiously, as it will be worried about a risk to its credibility and the impact on expectations if it cuts too soon and then has to reverse course. It will be interesting to see if last month’s highly unusual three-way split within the MPC is repeated.”