The title to Deutsche Bank 's note says it all:
Inflation – we have a problem; terminal now at 5.25%
ICYMI, the data can be found from here:
Deutsche Bank, in brief (bolding is mine):
- April inflation data was stronger than expected
- Price persistence remains a dominant theme in the UK – perhaps more so than any other G7 economy. Supply shocks, still de-anchored inflation expectations, fewer promotional discounting, and some potential margin building are likely keeping prices from normalising as quickly as traditional models would imply.
- We now expect a slower descent to target. And with price and wage inflation now likely to remain stronger than anticipated, we raise our terminal rate forecast to 5.25% (i.e. consistent with several policy rules as we highlighted last month).
- Risk management considerations will, we think, force the MPC to push rates higher and further than previously intended. Moreover, we now shift our first rate cut call to Q2-24, with the easing cycle likely to remain shallow. Risks to our call are now balanced, in our view. But for all intents and purposes, we now see policy shifting firmly towards a 'higher for longer' era.