UK Inflation Remains Above 2.0% Fueling Dispute Among BoE Members

U.K. consumer price inflation remained above the Bank of England's 2.0% target in April since December 2009. Core inflation ticked slightly higher to 2.4% reiterating lingering challenge for the BoE to offset price pressures while focusing on reviving lackluster growth.

The Office for National Statistics in London today said annual inflation rate was 2.8% in March unchanged from the previous month. Inflation rose 0.3% from the previous month when it rose 0.7%.

Inflation remains resilient in UK amid ongoing focus from the Bank of England (BoE) on growth. The MPC remain divided on the need to expand stimulus with the minutes of the April 3-4 policy meeting tomorrow likely to show again members split on the need to expand stimulus.

The growth outlook for U.K. remains weak and persistent inflation pressures add to the lingering problems with weak wage growth and struggling households and businesses.

Inflation outlook has not much changed to alter the scope for the BoE that remains at odds for further monetary stimulus at this time, especially as King's term approaches the end.

The Monetary Policy Committee (MPC) voted to leave asset purchase program at 375 billion pounds and interest rate at 0.50% during their meeting this month amid inflationary pressures threatening the economy and skepticism regarding further expansion in asset purchases as UK economy suffers the triple-dip!

Minutes of the meeting may again show a persistent split among the nine-panel members as King, Fisher and Miles resumed their calls for additional stimulus highlighting that "further asset purchases, by lowering longer-term interest rates and supporting a range of asset prices, could facilitate a smoother path towards the economy's new equilibrium, help prevent a more persistent reduction in spending, and thereby avoid potentially lasting destruction of productive capacity and increases in unemployment."

The pound remained weak following the data that again dim hopes for any near decision on stimulus. The GBPUSD remains biased lower after the recent relief rally took the pair to test the upper boundaries around 1.54 areas. The pair remains biased to the downside and hovering around 1.5270 areas where stability below 1.5325 will keep the bearish pressure on sterling to extend the downside move as far as stability is below 1.5385.

With the BoE minutes due tomorrow Wednesday the volatility is likely to extends for sterling. The focus remains from the BoE on the FLS for now as the majority of the MPC reject expanding the APF with inflation above 2.0% target.

The Chancellor of the Exchequer maintained the mandate for price stability and the 2.0% target, though offered a more relaxing term for the BoE to reach the target in context that is!

Recession hit Britons continue to feel the pinch, yet signs of relief is seen from the impact of the sharp drop in commodity prices. Producer price data showed that core output prices rose a slim 0.1% from the previous month in March and 1.3% from a year earlier pressured by the sharp drop in crude prices that dropped 2.6% the most since June.

Focus remains on more data from UK this week with the jobs report also due tomorrow Wednesday and likely to reflect lingering weakness in the jobs market with little signs of progress. Unemployment likely held at 7.8% while jobless claims expected to have remains unchanged in March after a drop of 1.5 thousand drop stressing on the economic challenges facing policy makers to drive recovery again.

IMOH, Clement I.
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