BoE: The required caution on monetary easing will continue to support the Pound Sterling – MUFG

The Pound Sterling (GBP) has not moved much in response to the February UK CPI data released by the Office for National Statistics (ONS). Economists at MUFG Bank analyze GBP outlook.

Weaker than expected CPI but services a little stronger

The data revealed overall and core measures falling 0.1ppt more than expected to 3.4% and 4.5% respectively. Services CPI, a big focus for the BoE, also fell from 6.5% to 6.1%, but by 0.1ppt less than expected. 

The MPC meeting on Thursday may see a change in the vote composition. In February the vote was 6-2-1 with Dingra the voter for a cut. Mann and Haskel voted to hike and we could see one or both drop their votes for a hike and join the majority but overall we expect pricing for the first cut in August to be largely maintained, limiting moves for the pound. Overall, the required caution on monetary easing will continue to support the Pound.