UK March CPI expected to remain at zero - Rabobank

FXStreet (Barcelona) - Jane Foley, Senior Currency Strategist at Rabobank, expects UK’s CPI to remain at 0%yoy in March, but risks exist for a negative dip, and further add that in spite of the low CPI consumers or firms have refrained from adopting a deflationary mindset.

Key Quotes

“…UK Mar CPI is expected to remain at zero y/y. There is, of course, a risk that inflation will tip into negative territory and so provide the UK headline writers with even more fodder.”

“As it stands, however, there is little evidence that either UK consumers or firms have adopted a deflationary mindset. Healthy retail sales data suggest that UK consumers are spending the additional disposable income afforded to them by the drop in food and energy prices and this behaviour suggests that the BoE are unlikely to have to cut rates again.”

“Although the BoE is currently in purdah ahead of the general election, before parliament was dissolved several MPC members defended the view that the BoE was unlikely to have to cut rates again.”

“The lack of evidence of deflationary behaviour in the UK should offer some protection to sterling. That said, in the coming weeks the influence of politics can be expected to increase.”