Economists betting on Britain to lead global easing cycle according to Bloomberg.

Britain is beginning to curb inflation more rapidly than the US, indicating a divergence between the two economies that might enable the Bank of England to consider cutting interest rates before the US Federal Reserve.

Official UK figures due out this week are expected to show that the Consumer Prices Index eased further in March while unemployment picked up as Britain shakes off a recession.

The US by contrast just reported an unexpected rise in inflation and a falling jobless rate, with the economy getting stronger.

Both UK Chancellor of the Exchequer Jeremy Hunt and Bank of England Governor Andrew Bailey will be in Washington when the Office for National Statistics releases the most recent UK inflation and wage data this week. The reports are anticipated to show:

  • UK inflation decreasing for a second consecutive month to 3.1% in March.
  • Unemployment rising to 4% in the quarter through February.
  • Regular wage growth easing to 5.8% from 6.1% in the same period.

In contrast, inflation in the US has risen for the past two months to 3.5%. This marks the first time since March 2022 that the UK’s headline inflation rate is lower than that of the US.

The results indicate a significant shift, with investors now speculating that the Bank of England could lead a global trend towards lower borrowing costs later this year, rather than following suit. While expectations for the first US rate cut have been pushed back to September, markets are nearly fully pricing in a reduction in Britain by August.

A divergence in interest rate policies is expected to be a key topic at the spring meetings of the International Monetary Fund in Washington this week.

Source: Bloomberg

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