UK February CPI came in at +0.9% m/m and +3.2% y/y, much stronger than expected, versus median forecasts of +0.3% and +2.6% respectively. The BOE is mandated with keeping inflation at 2% and Mervyn King now has to write an explanatory letter to the government.
Meanwhile February RPI came in at +0.6% m/m, unchanged y/y, again much stronger than expected, versus median forecasts of -0.1% and -0.7% respectively.
The data should put deflationary fears to rest, at least for the time being. Cable has rallied on the news, presently up at 1.4760.
