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UK Inflation: UK CPI Misses Expectations. How will the BoE React?

UK Inflation: UK CPI Misses Expectations. How will the BoE React?

Tammy Da Costa, Analyst

UK Inflation Highlights:

  • UK inflation data comes in softer than expected, how will the BoE react?
  • Energy prices remain the key catalysts for rising prices
  • GBP/USD turns bearish on the release of the data

UK CPI (September) Slightly Softer than Expectations

The release of UK CPI data for the month of September came in at 2.9% (below the expected 3%) while headline inflation (YoY) came in at 3.1% (below the expected 3.2%)

UK Inflation: UK CPI Misses Expectations. How will the BoE React?

DailyFX Economic Calendar

Although the slightly softer print may cast a shadow of a doubt for the MPC members who currently maintain a dovish stance, the transport and housing sector continue to weigh on consumers who are now paying more for items tied to these industries.

UK Inflation: UK CPI Misses Expectations. How will the BoE React?

Source: Office for National Statistics

With energy prices and supply shortages weighing on consumers, this month’s inflation report is expected to be of particular interest for the Bank of England (BoE) who have been facing pressure to rate hikes in their next meeting on 4 November 2021.

UK Inflation: UK CPI Misses Expectations. How will the BoE React?

Source: Refinitiv

Visit the DailyFX Educational Center to discover how CPI data affects currency pairs

Upon the release of the data, GBP/USD tumbled as investors repriced the probability of a delayed rate hike.

GBP/USD 5 Min Chart

UK Inflation: UK CPI Misses Expectations. How will the BoE React?

Chart prepared by Tammy Da Costa using IG Charts

As the Bank of England prepares to meet on 4 November 2021, the release of commentary by MPC meetings will likely serve as an additional catalyst for price action for the imminent move.

--- Written by Tammy Da Costa, Analyst for DailyFX.com

Contact and follow Tammy on Twitter: @Tams707

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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