livboereepoker| The UK's CPI hit in April, or an unexpected upward trend suppressed the probability of interest rate cuts!

Huitong Financial App News-- Wednesday, May 22, Beijing timeLivboereepoker: 00LivboereepokerThe UK will release CPI data for April. The Bank of England, City economists and the "market" are too optimistic about a sharp drop in UK inflation. Economist Andrew Sentance, a former member of the Bank of England's Monetary Policy Committee (MPC), said inflation would rise by 2% in April from a year earlier.Livboereepoker.7%, much higher than the market expected from 3% in MarchLivboereepoker.1% to 2.1%.

Sentance said: "I forecast UK CPI inflation of 2.7 per cent, which is much higher than the 2.1 per cent consensus of City economists. They seem to have greatly underestimated the underlying inflationary momentum from rising wages and services. "

If the Sentance is right, waiting for a sizeable upside surprise could undermine any hope that the Bank of England will cut interest rates this summer. After a big upside surprise, bets on an interest rate cut in June will be erased and the chances of a rate cut in August plummet, which could lead to a sharp sell-off in UK sovereign bonds. This will push up bond yields and sterling.

There appears to be a lot of uncertainty in the outcome, with one analyst warning that sterling could fall sharply if lower-than-expected inflation eventually leads to a series of interest rate cuts.

The Bank of England and City economists expect inflation to fall sharply, depending on a sharp drop in household energy bills in April as the legal price ceiling has been lowered by "about 12 per cent".

In a post on Twitter, Sentance explained that the fall in energy prices "brings only 0.4 per cent of the 1.1 per cent decline expected, and there are many other sources of inflation".

"the market and the public have been obsessed with low interest rates and interest rate cuts for too long, and it's time to get used to the 'new normal'," Sentance said. I think there will be a big impact on Wednesday if market expectations are consistent with the survey. "

Ben Broadbent, the outgoing deputy governor of the Bank of England, supported expectations of a June or August rate cut on Monday. "the MPC will continue to learn from the coming data, and if things continue to follow its forecasts, which suggest that policy will have to become less stringent at some point, then bank interest rates may be cut sometime in the summer," he said in a speech.

Given that the central bank expects inflation to be announced to be close to 2.0 per cent, his assumptions and expectations of imminent interest rate cuts are likely to be subverted.

"in the Bank of England's last speech, Ben Broadbent hinted that he was in favour of cutting interest rates this summer," Sentance said. Thirteen years ago, Broadbent succeeded me as a member of the MPC and then became vice president. He has been very dovish and defended ultra-low interest rates in the 2010s. Therefore, it is not surprising in this final speech. "

Summing up the above news, we can see that if the UK CPI unexpectedly rose in April, suppressing the probability of interest rate cuts, the pound will be supported. However, if inflation falls below expectations, it will trigger a series of interest rate cuts and a sharp fall in sterling, which investors need to pay attention to.

Daily chart of the pound against the dollar 11:47 on May 22nd, Beijing time, the pound was trading at 1.2711 against the dollar.

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