Another Soft UK CPI Print Weakens The Case For BoE Hikes

May's softer-than-expected UK CPI data, combined with signs of a cooling labour market, have significantly weakened the case for immediate Bank of England rate hikes. Consequently, the BoE is expected to maintain its 'active hold' policy.

Key Takeaways

• 1.UK inflation data for May surprised to the downside, reducing the likelihood of Bank of England (BoE) interest rate hikes.
• 2.The BoE is expected to maintain an 'active hold' stance, with a 7-2 vote to keep rates unchanged in the upcoming meeting.
• 3.The economic environment shows a weakening UK labour market and limited signs of second-round inflation risks, rendering the hawks' case for urgency weaker.

Table of Contents

• Another soft UK CPI print weakens the case for BoE hikes
• Another soft CPI number adds to the string of dovish UK data
• Aside from transport almost all sectors weighed on the headline inflation rate in May
• UK inflation has eased since March and remains below the 3% mark
• Reassessing our BoE call – the bar for hikes looks increasingly high

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