This undershoot may lead to some division at tomorrow’s Bank of England meeting.
UK inflation came in less than forecast in August, rising 6.7% year-on-year against market expectations of a 7.0% rate. Core inflation, which excludes energy and food inflation, fell to 6.2% – a much larger drop from the previous month’s rate of 6.9%. This welcome undershoot in inflation against forecasts will be spun positively by the government that their plan is working and may even lead to some division at tomorrow’s Bank of England (BoE) meeting. However, we should probably still prepare ourselves for a dovish final hike in rates in this cycle.
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