UK inflation expected to rise for second month in blow to Rishi Sunak – latest news

On Tuesday, figures from the US confirmed that inflation slowed to 3.1 per cent from 3.4 per cent earlier, however the slowdown was lower than the drop to 2.9 per cent that had been expected.

Axel Rudolph, senior market analyst at IG, mentioned: “A higher-than-expected US CPI print provoked a sell-off in global equities as rate cut expectations are pushed back.”

London’s markets slid in a depressing afternoon session amid considerations over persistent inflation, studies Henry Saker-Clark.

The FTSE 100 had a cautious morning of buying and selling however shortly dropped to its lowest level this month after hotter-than-expected US Consumer Price Index (CPI) inflation figures.

The information prompt hopes of rate of interest reductions quickly might be untimely and significantly dented housebuilders amid considerations concerning the mortgage market.

London’s high index moved 0.81 per cent, or 61.41 factors, decrease to end at 7,512.28, with Taylor Wimpey, Barratt Developments and Persimmon all notable fallers.

Wage progress has slowed to its lowest stage for greater than a yr however remains to be outpacing inflation, in accordance to official figures.

The Office for National Statistics (ONS) mentioned common common pay progress, excluding bonuses, fell to 6.2% in the quarter to December, down from an upwardly revised 6.7 per cent in the three months to November.

This was the slowest progress for the reason that three months to October 2022.

But when taking Consumer Prices Index (CPI) inflation under consideration, actual common wages rose by 1.9 per cent – a excessive since summer season 2019, excluding the pandemic-skewed years.

This is thanks to inflation having fallen again sharply after hitting an eye fixed-watering 41-yr excessive of 11.1 per cent seen in October 2022.

But the autumn in wage progress was lower than expected by most consultants and in monetary markets, with buyers reining in their bets on rate of interest cuts this yr after the info.

The larger-than-expected wage rises in Tuesday’s Office for National Statistics figures can even spark worries of delayed cuts to the Bank of England’s base rate of interest – provided that wage rises can push up inflation.

“Today’s wage rises contribute to tomorrow’s spending power, impacting demand and influencing inflation, so the Bank will be keenly monitoring average earnings growth in particular,” mentioned Rob Morgan, chief funding analyst at Charles Stanley.

“Resilient wages have been a driver of sticky consumer price inflation, and they are not falling back into line as fast as the BoE (Bank of England) would like as it looks to return inflation to the 2 per cent target.

“What’s more, a further inflationary impulse could lie in wait in the form of an increase to the national minimum wage of almost 10 per cent from April, which stands to simultaneously increase costs for employers and bolster household spending power, potentially exerting further upward pressure on prices.”

Economists will probably be monitoring the info to strive to determine what affect it may need on the Bank of England.

The Bank’s Monetary Policy Committee (MPC) is tasked with maintaining inflation as shut to 2 per cent as attainable.

One of the primary methods it has to do that is by altering rates of interest. By growing charges it restricts the amount of cash that mortgage holders have to spend, due to this fact lowering demand for items and providers. That can assist take strain off costs.

So if inflation is larger than the 4.1 per cent the MPC expected in its final forecast, that might make price setters extra doubtless to delay cuts to the bottom price.

Following a interval of decline in borrowing prices, a number of main mortgage lenders have introduced will increase in charges in latest days, my colleague Alex Ross studies.

Mortgage charges are intently tied to swap charges, which is successfully the speed the lenders pay a monetary establishment for funding, and that’s affected by the Bank of England’s base rate of interest and inflation.

Tomorrow, consultants consider inflation will go up marginally from the annual 4 per cent recorded final month.

Ken James, director at Contractor Mortgage Services, instructed The Independent: “Lenders at the moment are pricing in potential inflation rises.

“I think what they are doing is safeguarding. They are saying ‘we think that everything is going to rise with all these figures coming in and therefore let’s partly protect ourselves against that future rise and get it in early’.

“I think with tomorrow, because I’m pretty confident rates are going to rise with inflation, I think lenders have just done it early, I think they are just protecting themselves.”

It’s been a turbulent few days for potential and present householders trying for mortgages, with a number of main lenders saying will increase in charges after a interval of decline in borrowing prices.

Nationwide, the nation’s largest constructing society, revealed its mortgage charges would rise by up to 0.25 share factors on Tuesday. It comes after lenders Halifax and TSB mentioned they have been additionally elevating charges on a few of their merchandise.

But, unusually, different lenders have gone in the opposite path. Santander has introduced mortgage price cuts of 0.16 share factors.

The combined image for mortgage charges comes after the Bank of England held its base price at 5.25 per cent earlier this month. However, it’s Wednesday’s launch of inflation figures which seem to have resulted in what some brokers are calling a “yo-yo” market.

My colleague Alex Ross studies:

Despite an expected blip in Wedesday’s figures, inflation might fall as little as 3.4 per cent in February, an economist has mentioned.

Samuel Tombs, the chief UK economist at Pantheon Macroeconomics who believes that inflation hit 4.1 per cet in January, mentioned that no matter Wednesday’s information, inflation is probably going to fall significantly, to 3.4 per cent, this month.

This graphic by the PA news company charts the speed of inflation as recorded in latest years by the Office for National Statistics: