The Bank of England finds itself in a delicate position: the central bank struck an optimistic tone on the U.K.'s inflation path and hinted that its interest rate hiking cycle might soon come to an end.
Yes, but: A slate of data has pointed to more persistent inflation pressure — not less.
Why it matters: The problem is one plaguing central bankers around the world taking aggressive steps to raise rates, with inflation proving more difficult to stamp out amid strong underlying demand.
By the numbers: Inflation hit 10.1% in the year through March, slowing slightly from the 10.4% in February. Economists — including those at the Bank of England — had anticipated the annual rate would break below double digits last month.
- Food saw some of the sharpest price increases, rising 19% in the 12 months through March — a percentage point faster than the prior month.
- Excluding food and energy costs, the annual rate held steady at 6.2% — one sign of stubborn price pressures.
What to watch: Further complicating the inflation outlook is recent data pointing to accelerating wage growth, paired with the rising threat of workers striking for better pay.
The bottom line: The problem facing policymakers across the pond mirrors the issue facing some other nations, including the U.S.
- Sticky price increases mean inflation will likely recede more slowly than previously thought.