Everyone knew inflation would rise in February – even then, however, last month’s jump is alarming, the metric reaching its highest level since September 2013.
At 2.3% the reading is not only greater than the 2.1% forecast, but a whopping 0.5% steeper than the 1.8% year-on-year increase seen in January. Inflation is also, crucially, outstripping wage growth by 0.1% based on the most recent figures, with consumers increasingly bearing the brunt of the Brexit uncertainty.
Following on from the surprising hawkishness of last Thursday’s Bank of England meeting the pound has received another major boost, surging 0.9% against the dollar (hitting a fresh 3 week peak of 1.245-plus in the process) while reclaiming 0.3% off of a previously healthy-looking euro. That’s because now inflation is a decent whack above its long-held 2% target Mark Carney and co. face a series of difficult conversations about if and when to tighten monetary policy, and how to balance this with the institutions Brexit anxieties..
The FTSE wasn’t best pleased by the pound’s explosive growth, dipping 0.2% but still keeping its head above 7400. Any Eurozone enthusiasm, meanwhile, was dampened by the euro’s gains against the dollar, leaving the DAX flat and the CAC up just 0.2%.
Looking ahead to the US and there doesn’t appear to be anything that can shift the conversation away from UK inflation. Currently the Dow Jones is facing a 20 points increase after the bell, keeping the rather dull index firmly in its March trading bracket.