UK Inflation Stagnates at 2.8% Ahead of Bank of England Rate Decision

Sterling dipped against the U.S. dollar as investors recalibrated their outlook for future rate hikes. The Office for National Statistics attributed the stability to falling prices for meat, dairy, and heating oil, which successfully countered a sharp spike in petrol and airfares. While services inflation climbed to 3.7% from 3.2%, core inflation—stripping out food and energy—edged up only marginally to 2.6%.

Financial markets are finding optimism in a pending U.S.-Iran agreement regarding the Strait of Hormuz, which could stabilize oil exports. Yael Selfin, chief economist at KPMG, noted that the latest data reinforces the case for a cautious stance from the Monetary Policy Committee. Most economists anticipate a 7-2 vote to maintain rates at 3.75% this Thursday, as Governor Andrew Bailey balances the risks of rising raw material costs against the need to preserve household confidence in the 2% inflation target.