That said, we doubt this latest data will change the minds of many officials at the Bank of England ahead of its February meeting. Not least because tomorrow’s inflation data carries the risk of an upside surprise, depending on how air fares are measured in December. We expect rates to remain on hold next month.
By March, however, the Bank will have had a further two jobs reports and, assuming the current benign wage growth trends continue, we think it will have enough evidence to cut rates again. By June, we should have had inflation data showing headline CPI back at 2% or even below, which should spur one final cut that month, leaving Bank Rate at 3.25%.