Global market | BOE on edge on interest rates awaits crucial UK inflation data

London: The Bank of England will keep a close eye on a tough set of economic data in the coming days after a sharp decision to leave interest rates unchanged amid concerns that inflation remains uncomfortably high. A busy week for watchers of the British economy will include labor market figures and consumer price data, followed by reports on government finances and retail sales.

The main focus will be Wednesday’s inflation data, not least because it is the last major outcome for a deeply divided BOE ahead of its next policy decision in March. Policymakers split 5-4 this month on keeping rates steady, making borrowing costs among the highest in the Group of Seven – next to the US Federal Reserve’s cap.The BOE expects consumer price growth to return to the 2% target in April, although inflation will remain high for now. Officials expect inflation to reach 2.9% in January, while the average forecast by economists is 3%. Analysts from Pantheon Macroeconomics and Investec say higher-than-expected retail prices and hotel costs could keep inflation steady.

Policymakers will also look for broader evidence that disinflation is taking hold, making Tuesday’s labor market report another key data point. Signs of continued weakening employment would reassure officials that price pressures are easing.

Wage growth appears to be slowing. Investec expects regular private sector wage increases to slow to 3.4% in December, compared with 3.6% in November and 3.9% a month earlier.

Unemployment has risen to 5.1%, nearly a decade high excluding the pandemic, and could continue to rise. Separate tax data shows that 184,000 jobs have been lost in the past 12 months. The incoming numbers will fuel an increasingly tense debate at the BOE. Recent comments have underlined the divisions among policymakers, with chief economist Huw Pill arguing that interest rates may be slightly too low, while deputy governor Sarah Breeden has predicted a quarter-point cut by the end of April.

Elsewhere, global purchasing manager indexes, inflation data from Japan to Canada and Anna Breman’s first policy decision as governor of New Zealand’s central bank will grab attention.

Below you will find an overview of the most important global economic events of the coming week.