FTSE Flat After Weaker than Expected Inflation Data, Chancellor Reeves to Give Budget Update
UK Inflation rose at a slower rate than forecasts but leaves pressure on BoE. Reeves to cut growth forecasts.
- Inflation YoY 2.8%
- Core Inflation YoY 3.5%
- Finance Ministry to cut growth forecast to 1% from 2%
The FTSE attempted a premarket rally this morning, gaining 0.38%, falling again after inflation data to trade down 0.1%.
Inflation Data Softer
The FTSE should have benefitted from today’s softer inflations data. YoY inflation came in at 2.8%, down from last month’s number of 3%.
Core Inflation also printed lower at 3.5% from last month at 3.7%. However, Services Inflation YoY remained at 5%, compared to forecasts of a slight decline to 4.9%.
The services inflation is a number that is closely watched by the BoE, and the fact that inflation is still far from the central bank’s target of 2% is weighing on investor hopes for swift cuts in rates.
Some economists see inflation peaking at 4% in 2025, as higher employer taxes filter through to higher prices for goods and services.
FTSE Live Chart
Chancellor Reeves to Cut Growth Forecast
The finance minister is going to publish an update on the budget today and is reported to show economic growth forecasts cut by half, from 2% to 1% for 2025.
The Financial Times revealed that Reeves will say that the financial buffer of £9 billion has been wiped out, citing familiar with the announcement.
BoE Expectations
Economists predict that the BoE will show caution ahead of an increase in employment costs that will take effect in April.
The BoE has also cautioned investors about expecting interest rate cuts at a quick pace. The central bank has a conundrum of lower growth and higher inflation.
While the BoE needs to spur growth though interest rate cuts, its main mandate is to keep inflation under 2%.
ABOUT THE AUTHOR
See More
Sidebar rates
Related Posts
Save
Join 350 000+ traders receiving Free Trading Signals
Alerts
Rates
Calendar
Signals