The rise in CPI inflation from 3.0% in February to 3.3% in March (consensus and CE forecast 3.3%) was almost entirely due to higher fuel prices and tells us little about whether the leap in energy prices will trigger longer-lasting “second-round” effects on inflation in the coming quarters. With the labour market weak, we still think that a prolonged pause, rather than a series of interest rate hikes, is the most likely outcome.
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