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Deutsche Bank's Sanjay Raja forecasts UK headline CPI to rise to 3.01% year-on-year in May 2024, with core CPI at 2.72% and services CPI at 3.65%. The bank expects CPI to average 3.1% in 2024, easing to 2.6% in 2025 and 2.3% by 2028, but warns of persistent upside inflation risks. This projection suggests a slower-than-expected cooling in UK inflation, which could delay the Bank of England's rate-cut cycle and keep monetary policy tighter for longer.
For markets, the delayed inflation decline may pressure GBP/USD, as higher-than-anticipated CPI data could reinforce hawkish BoE expectations. Traders should monitor upcoming CPI releases and BoE policy statements for potential volatility. The UK's inflation trajectory also impacts global markets through its influence on dollar liquidity and cross-asset correlations.
MENA investors should watch how GBP volatility affects Gulf-based UK equity holdings and cross-border investments. The BoE's policy path will remain critical for emerging market flows, particularly in the Gulf where dollar-GBP currency pairs are actively traded. Key watchpoints include May's CPI data and BoE's Q2 policy decisions.
