While a lot of the surprisingly large fall in services inflation from 5.0% in November to 4.4% in December (CE forecast 4.8%, BoE 4.7%) was due to a very sharp fall in airfares inflation, underlying price pressures still appear a bit more favourable than we had thought. This strengthens the case for a 25 basis points (bps) interest rate cut in February and lends some support to our view that rates will fall further and faster than markets expect.
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