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UK Inflation lower than expected

The British pound dropped off slightly after data showed UK inflation slowed more than forecast in February, the first in a series of economic reports due during a week when the Bank of England is expected to signal interest rates will rise as early as May.

Britain’s agreement with the European Union on Monday for a Brexit transition deal – which had sent sterling soaring – clears the path for the BoE to raise rates as early as May. Markets factor in a roughly 70 percent chance of a rate increase despite February’s slowing inflation.

Official data published on Tuesday showed consumer prices rose an annual 2.7 percent last month, the weakest increase since last July as the impact of the 2016 Brexit vote faded from the figures.

Wage growth numbers are due tomorrow and the BoE decision on Thursday. The central bank has signaled that it wants to see wage pressures building before it hikes rates.

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