TD Securities notes UK headline CPI matched expectations at 3.3% year-on-year in March, reflecting early post-conflict price effects, especially from motor fuels. Services inflation surprised higher at 4.5%, led by transport and airfares, while core inflation edged down to 3.1% on stronger discounting in core goods. The mixed picture underpins the Bank of England’s cautious stance for next week’s meeting.

Services strength offsets softer core goods

"UK CPI headline measure came in in line with market expectations at 3.3% y/y (TDS/mkt: 3.3%; BoE: "close to 3.5%"), with March being the first month showcasing the post conflict onset pricing."

"Energy was, of course, a main contributor, largely on the motor fuels side."

"Looking beyond headline, services surprised to the upside at 4.5% y/y (TDS: 4.4%; mkt: 4.3%; prior: 4.3%) with transport (specifically, airfaires) being the main story, as higher fuel prices start to feed through to this sector."

"Core services (excl. non-private rents, airfares, and accommodation) remained unchanged at 4.6%, suggesting more stability in the broader economy."

"This mixed release supports the MPC's cautious stance for next week's meeting."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)