Reaction to UK CPI (13/04/22)
by Shafiq Shabir
Head of Electronic Trading, Intertrader
Hot on the heels of the US’s eye-watering figures earlier this week, rocketing prices in the UK show that one of the defining economic trends of 2022 will be persistent, escalating inflation.
The hard truth is that the worst has yet to be fully felt by the consumer – and the real damage has yet to filter through into the figures. The start of April saw national insurance contributions rise and an increasing energy cap that has taken household bills to unprecedented levels. Meanwhile, the inflationary impact of ongoing supply chain issues as a result of the ongoing Russian assault on Ukraine has yet to be fully realised. Compounded by ongoing but perhaps overshadowed lockdown-related unrest in Shanghai – one of the world’s most important industrial cities – the inflationary outlook looks likely to deteriorate further in coming months. We already know that wages are not keeping track, which is squeezing consumer spending power.
The Bank of England is likely to move to try and curb additional inflationary pressures in the medium term, with another interest rate hike at May’s MPC meeting possible. But we won’t see immediate change in inflation in the short term. All eyes will be on Threadneedle Street when they next meet, but traders should remain vigilant when it comes to riskier and more speculative assets in the meantime.
Published: 13 April 2022
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