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Analysts at Rabobank suggest that a comprehensive set of consumer and producer price data from the UK should give further backing to a scenario where the BoE will be cautious to hike too soon, but without derailing its hiking plans altogether.

Key Quotes

“Both core and headline inflation are projected to have eased a tad in April, although the broad based appreciation in sterling since August last year came to a halt last month, its strength may still filter through, thus keeping upward pressures stemming from higher energy costs in check. That said, PPI numbers for that same month are more likely to already show that pressure in the form of a rise in headline YoY growth. If the recent jump in oil is sustained, a renewed rise in headline consumer price inflation could support also rate hike later this year (our base case is August) as the Bank sees limited spare capacity as a risk for second round effects. However, that would also require some positive surprises on the economic front, a condition that has been lacking recently.”