UK CPI Inflation Report To Influence BoE Interest Rate Decision

September 19, 2023 22:11

Financial news reporters will be pretty busy this week as several central banks are expected to announce their interest rate decisions, with the Federal Reserve (Fed) once again drawing most of the attention. As the week starts, economists focus on the UK CPI inflation report and the People's Bank of China (PBoC) interest rate decision.

Commenting on the recent oil prices hikes, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said that OPEC targets less volatility in energy markets rather than prices. He also noted that “the world could go from one type of energy crisis to another if supply chains for critical minerals aren't well planned."

Minutes from the last Reserve Bank of Australia (RBA) meeting revealed that its board believes that inflation is still too high and reiterated that further monetary policy tightening may be required.

UK CPI Inflation August Report

The UK CPI inflation report will draw investors’ attention as the country’s economy is near the recession threshold. Economists suggest that inflation could rise to 7.1% on an annualised basis and 0.7% on a month-to-month basis. Earlier in the year, headline inflation hit double figures, forcing consumers to reevaluate their budgets in order to cover their needs. The BoE has also scrambled to reduce inflationary pressures by increasing interest rates.

The Centre for Economics and Business Research (CEBR) said in a report that inflation figures remain too high. CEBR analysts wrote that “core inflation and services inflation are not yet moving in the right direction, which suggests that wage pressures are still feeding through into higher prices. The recent sharp uptick in global oil prices should be a warning — any potential new exogenous shock could quickly change the picture and reignite an inflationary spiral.”

Canada Consumer Price Inflation August Reports

Later today, the Bank of Canada (BoC) and Statistics Canada will publish their individual CPI inflation report for the month of August. Both reports are forecast to show a spike in headline inflation with economists expecting the BoC suggested figure to come in at 3.8%, on an annualised basis. The BoC’s governing board has noted that inflation is still too high at 3.3% and that the downward momentum in consumer prices is not satisfactory. The BoC’s head has said that rates would be reduced when headline inflation falls to 2%.  

Interest Rate Decision In China

On Wednesday, the People's Bank of China (PBoC) will announce its decision on interest rates. The PBoC is likely to maintain its benchmark Loan Prime Rates (LPR) with the 1-Year LPR currently at 3.45% and 5-Year at 4.20%. It’s worth reminding, that the central bank of China disappointed market analysts in August as it delivered lower than expected hikes on Loan Prime Rates.  

The Chinese yuan’s value sank to a 16-month low against the US dollar last week. In its quarterly monetary policy report in August, China’s central bank vowed to “actively and steadily respond” to depreciation pressure on the yuan. It should be noted that China holds the largest foreign exchange reserves in the world, with some economists suggesting that it could use them to support the country’s currency.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Miltos Skemperis
Miltos Skemperis Financial Content Writer

Miltos Skemperis’ background is in journalism and business management. He has worked as a reporter on various TV news channels and newspapers. Miltos has been working as a financial content writer for the last seven years.