Week ahead: City braces for more eye watering inflation data

The City’s attention this week will zero in on latest UK inflation estimates published on Wednesday.

Although experts expect the rate of price rises to remain broadly unchanged, investors are likely to gulp at inflation remaining at historically high levels.

According to the Office for National Statistics (ONS), inflation hit 5.1 per cent in November, the highest rate in over a decade.

Inflation is unlikely to budge from that level during the first quarter of this year, and then soar once the energy watchdog’s adjustment to the bills cap takes effect in April.

“We think that CPI inflation will tread water for a couple of months until a leap in utility prices pushes it up all the way to 6.9 per cent in April,” Ruth Gregory, senior UK economist at Capital Economics, said.

Persistently high inflation is likely to put upward pressure on yields on government debt, which have been climbing already, driven by investors bracing for the Bank of England to launch a rate hike spree this year to tamp down on price rises.

Jobs market and wage data, released on Tuesday, are also predicted to come in hot, with economists forecasting another uptick in payroll numbers and a possible 4.1 per cent rise in earnings.

Strong wage pressures will strengthen the case for the Bank of England to hike interest rates for the second time in as many months at its next meeting on February 3.

Miners dominate the corporate agenda for the week ahead, with the likes of Rio Tinto and Antofagasta updating markets on Monday and Wednesday respectively.

City press favourite and broker CMC Markets posts a trading update on Thursday, as does food delivery firm Deliveroo.