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The latest inflation data coming out of the U.K. shows that price pressures are lingering, and that other developed nations are further behind than the U.S. in fighting inflation.
The U.K. Office for National Statistics reported that consumer prices fell to 8.7% year-over-year in April from 10.1%, a growth rate that nonetheless was higher than consensus expectations of 8.2%, and the Bank of England’s projection of 8.4%.
Food prices shot up by a staggering 19.2%, and that wasn’t the only area of inflation. Core prices actually accelerated, to 6.8% from 6.2%. Higher broadband bills, a broad-based increase in recreational goods prices, a rise in used-car prices and an increase in tobacco taxes all contributed to the inflation pressure.
Bond yields surged in reaction. The yield on the 2-year gilt
TMBMKGB-02Y,
rose 21 basis points to 4.34%. Economists at Nomura say they now expect rates hikes by the Bank of England in June, August and September. “We see few signs of easing in U.K. inflation that would give the BoE an opportunity to stop hiking sooner rather than later,” they say.
The U.K. data also show how price pressures are lingering overseas even after clearly peaking in the U.S.
The pound
GBPUSD,
initially rose against the dollar before trading back below $1.24.
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