Information about him inflation V Great Britain in February they surprised with their upward trajectory, jumping to 10.4% year-on-year from 10.1% in January. Annual price growth exceeded both market expectations (9.9%) and ours (10.1%).

This event breaks the downward trend since October (when the annual price change peaked at 11.1%), a downward trend that will no doubt continue into 2023, especially as the effects of the energy crisis ease. Because monthly data can be very volatile, we won’t pay attention to individual surprises. Moreover, a larger-than-expected jump in February followed a larger-than-expected drop in January, when the nominal interest rate fell to 10.1% year on year from 10.5% in December, below the expected rate of 10. 3%, according to Bloomberg. The aforementioned surprise, however, complicates the decision regarding his monetary policy. Bank of England during today’s meeting. In the wake of serious problems in the banking sector and the subsequent tightening of economic conditions, we have changed our forecast and expect the bank rate to remain at 4.0% from our previous estimate of a 25 bps increase. The decision will depend on whether policymakers believe that the inflation path is likely to be the start of a trend, or whether the phenomenon is due to normal monthly volatility. In addition, Bank of England officials will have to assess whether a potential period of liquidity accumulation and prudent lending behavior on the part of banks is indeed conducive to raising rates, at least for the time being.

The interest rate decision is complicated after inflation soared to 10.4% in February.

With the BoE likely at or nearing the end of a rate hike cycle, as evidenced by its transition to economic decision making in February, this is arguably the most difficult decision to make in recent years.

In the current turmoil in the global banking system, policy makers may signal that further increases may be needed if the economy recovers and inflation continues to surprise on its upward trajectory.

* Economist at Berenberg Bank.