The Golden Data on December 26th, HSBC economist Chris Hare wrote in a report that as time progresses to 2025, UK inflation is expected to cool again. The annual inflation rate has accelerated for two consecutive months, pushing the inflation rate above the UK Central Bank's target of 2%, reaching 2.6%. However, Hare believes that this is largely due to base effects from the same period a year ago, and potential inflation shows signs of slowing. He said, "As long as potential momentum remains fairly moderate, we should see inflation soften in the spring and beyond." He added that this should lead the UK Central Bank to reduce the Interest Rate from the current 4.75% to 3.00% by early next year.

The UK's core inflation rate in October rose by 0.4% compared to the average level of 0.25 basis points from October 2010 to 2019. Chris Hare, an economist at HSBC, believes this may impact the recent deflation trend and expects the Central Bank of England to maintain the interest rate in December, and then reduce it by 25 basis points in February and May next year.

Today's U.K. inflation data, Tuesday's wages data and last week's GDP data are all hawkish news for BoE policymakers, Chris Hare, senior economist at HSBC, said in a note. Given ongoing wage pressures, inflation is still a long way from falling closer to the Bank of England's 2% target. Hare noted that while there were signs of softening in the UK job market, it would likely take a long time to depress wage growth significantly. So, while their main view is that the BoE will only hike rates one more time in September, followed by a prolonged pause in rate hikes, the risk from wage pressures and inflation data is that the BoE may choose to tighten further, Hare said. tight monetary policy.

When it comes to inflation, the U.K. appears to have a broad problem, with labor costs supporting inflation in the U.K. more than in other countries, Chris Hare, senior economist at HSBC, said in a note. Annual labor cost inflation in the UK is about 7.5%, well above the euro area's around 5% and the US's around 4%. This may have strengthened inflation in April to some extent. UK core inflation jumped to a shocking 6.8% in April, with annual growth rates for many components including entertainment and used cars unexpectedly rising, while others, including food, fell less than expected. It currently looks like the Bank of England will not cut interest rates this year or next.