Taylor Swift’s upcoming Eras tour could present an additional consideration for rate-setters at the Bank of England as they deliberate over when to initiate interest rate cuts.
The inflation figures for June are set to be released soon, with economists predicting that the headline rate will hold steady at two percent. However, analysts are wary that Swift’s concert series, starting at Wembley in June and continuing into August, might disrupt progress on services inflation.
“Taylor Swift may have paused services disinflation,” economists at Capital Economics noted, pointing to her extensive tour schedule during key months.
Services inflation encompasses price increases across various sectors like restaurants, hotels, and entertainment, which policymakers at the Bank view as a more precise indicator of domestic inflationary pressures compared to the headline rate, influenced heavily by global economic factors.
In May, services inflation only marginally declined to 5.7 percent, nearly double the level needed for inflation to sustainably remain at two percent. Some economists speculate that this trend may persist into June, partly due to what they term as the “Swift effects.”
Reports have already surfaced of hotel room prices tripling on nights when Swift is performing, underscoring the economic impact of her concerts.
BNP Paribas analysts anticipate a noticeable increase in services inflation in June, while Rob Wood from Pantheon Macroeconomics highlighted the anticipated rise in consumer spending around Swift’s events.
“Anyone filling a stadium with 80,000 people is likely to book up nearby accommodations,” Wood told Bloomberg.
Despite efforts to overlook these “Swift effects,” stubbornly high services prices are expected to remain a concern. Persistent services inflation over recent months has raised concerns that the Bank may delay interest rate adjustments until September.
Last week, Huw Pill, the Bank’s chief economist, acknowledged the sustained strength of services inflation as a growing risk to his inflation outlook.
“It’s difficult to deny that inflation persistence in the UK continues to prove resilient,” he commented.
Policymakers will also closely monitor the latest labor market data due on Thursday. Like services inflation, wage growth has remained robust, posing challenges for policymakers.
Economists predict a slight moderation in annual wage growth to 5.7 percent, which still exceeds the level consistent with maintaining two percent inflation.
These forthcoming data releases are pivotal as they precede the Bank’s upcoming interest rate decision scheduled for August 1st. While rates remained unchanged in June, meeting minutes indicated a finely balanced decision, suggesting an August rate cut remains under serious consideration. Market sentiment reflects approximately a 50 percent likelihood of a rate cut in August.
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Taylor Swift’s upcoming Eras tour could present an additional consideration for rate-setters at the Bank of England as they deliberate over when to initiate interest rate cuts.
The inflation figures for June are set to be released soon, with economists predicting that the headline rate will hold steady at two percent. However, analysts are wary that Swift’s concert series, starting at Wembley in June and continuing into August, might disrupt progress on services inflation.
“Taylor Swift may have paused services disinflation,” economists at Capital Economics noted, pointing to her extensive tour schedule during key months.
Services inflation encompasses price increases across various sectors like restaurants, hotels, and entertainment, which policymakers at the Bank view as a more precise indicator of domestic inflationary pressures compared to the headline rate, influenced heavily by global economic factors.
In May, services inflation only marginally declined to 5.7 percent, nearly double the level needed for inflation to sustainably remain at two percent. Some economists speculate that this trend may persist into June, partly due to what they term as the “Swift effects.”
Reports have already surfaced of hotel room prices tripling on nights when Swift is performing, underscoring the economic impact of her concerts.
BNP Paribas analysts anticipate a noticeable increase in services inflation in June, while Rob Wood from Pantheon Macroeconomics highlighted the anticipated rise in consumer spending around Swift’s events.
“Anyone filling a stadium with 80,000 people is likely to book up nearby accommodations,” Wood told Bloomberg.
Despite efforts to overlook these “Swift effects,” stubbornly high services prices are expected to remain a concern. Persistent services inflation over recent months has raised concerns that the Bank may delay interest rate adjustments until September.
Last week, Huw Pill, the Bank’s chief economist, acknowledged the sustained strength of services inflation as a growing risk to his inflation outlook.
“It’s difficult to deny that inflation persistence in the UK continues to prove resilient,” he commented.
Policymakers will also closely monitor the latest labor market data due on Thursday. Like services inflation, wage growth has remained robust, posing challenges for policymakers.
Economists predict a slight moderation in annual wage growth to 5.7 percent, which still exceeds the level consistent with maintaining two percent inflation.
These forthcoming data releases are pivotal as they precede the Bank’s upcoming interest rate decision scheduled for August 1st. While rates remained unchanged in June, meeting minutes indicated a finely balanced decision, suggesting an August rate cut remains under serious consideration. Market sentiment reflects approximately a 50 percent likelihood of a rate cut in August.
