020 7898 0500After average earnings in the three months to February overtook inflation for the first time since spring 2017, all eyes were on yesterday’s inflation rate. The figure had been expected to hold steady at 2.7%, but it actually came in at 2.5% to increase the rate at which wage growth is outpacing the growing cost of things. It is the lowest rate since March 2017 and really did come as a shock to almost everyone.
It means there is a genuine possibility that the Monetary Policy Committee will vote against an interest rate rise in May, where previously it had looked certain. If the MPC do decide to increase rates, then there will be a big question mark surrounding the decision, as inflation has now dropped nearer to the central bank’s 2% target. You do have to wonder why they would increase rates if inflation is falling; that is no doubt what investors are thinking, as sterling suffered losses against the euro and dollar.
What a difference a day can make! On Tuesday, the pound hit its highest level against the dollar since the Brexit vote, but it has now fallen some way below that level. A crazy few days all told.
Today we will see retail sales for March. Year-on-year, they are expected to have increased from 1.5% to 2%, but on a month-by-month basis, the figure is expected to dip from 0.8% to -0.5%. But if yesterday told us anything, it was that forecasts are often not accurate and dangerous to rely on.
