UK food inflation hit a five-month high of 2.1% in February, as the prices of household-staples butter, cheese, bread, and eggs increased, according to data released by the British Retail Consortium this week. This is the first time since September 2024 that food inflation has been above 2%. The Bank of England now expects headline inflation to rise to 3.7% by the middle of the year before returning to target, as this is closely linked to food prices. The BoE also said that increases in food price inflation were likely to be due to rises in the national living wage and employers’ national insurance contributions, which come into effect next month.
The Bank of England now expects headline inflation to rise to 3.7% by the middle of the year before returning to target, as this is closely linked to food prices.
On Thursday, the European Central Bank reduced their benchmark rate for the sixth time since they started cutting rates last June, by another quarter point to 2.5%. However, the ECB said “monetary policy is becoming meaningfully less restrictive”, suggesting a slowdown in rate cuts. Traders have lowered their expectations of a second cut this year, with swap markets now pricing in a 70% chance of another cut, compared to an 85% chance before the ECB announcement. The euro initially rose against the dollar, before ending up 0.1% at $1.080.
Traders have lowered their expectations of a second cut this year, with swap markets now pricing in a 70% chance of another cut, compared to an 85% chance before the ECB announcement.
UK house prices unexpectedly fell 0.1% in February according to data released by lender Halifax on Friday, equating to a 2.9% increase year on year. Economists polled by Reuters had expected 0.3% month-on-month growth, or a 3.1% annual increase, but the impending end of the stamp duty holiday in April has seen sales start to slow down as buyers know they will struggle to complete before the deadline. However, these figures contrast with those released by Nationwide last week which indicated a month-on-month increase of 0.4%.
Our specialist's final thought
"Economists polled by Reuters had expected 0.3% month-on-month growth, or a 3.1% annual increase, but the impending end of the stamp duty holiday in April has seen sales start to slow down as buyers know they will struggle to complete before the deadline."
