Global Market | BOE on knife edge over rates awaits pivotal UK inflation data

London: The Bank of England will closely monitor a heavy slate of economic data in the coming days after a knife-edge decision to keep interest rates unchanged amid concerns that inflation remains uncomfortably high.

A packed week for UK economy watchers includes labor market figures and consumer price data, followed by public finance and retail sales reports.

Wednesday's inflation release will be the main focus, not least because it is the final key reading for a deeply divided BOE ahead of its next policy decision in March. Policymakers split 5-4 this month to hold rates, leaving borrowing costs - alongside the US Federal Reserve's upper bound - among the highest in the Group of Seven.


The BOE expects consumer-price growth to fall back to its 2% target by April, though inflation remains elevated for now. Officials anticipate January inflation at 2.9%, while economists' median forecast stands at 3%. Analysts at Pantheon Macroeconomics and Investec say higher-than-expected shop prices and hotel costs could keep inflation firm.

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 softening in employment would reassure officials that price pressures are easing.

Pay growth appears to be slowing. Investec expects private-sector regular wage increases to ease to 3.4% in December from 3.6% in November and 3.9% a month earlier.

Unemployment has risen to 5.1%, near a decade high excluding the pandemic, and may continue to climb. Separate tax data show 184,000 jobs have been lost over the past 12 months.

The incoming figures will feed an increasingly tense debate at the BOE. Recent comments have underscored divisions among policymakers, with chief economist Huw Pill arguing 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 New Zealand's central bank governor will draw attention.

Below is a roundup of key global economic events in the week ahead.