UK CPI Tops Consensus
Sterling got a boost after UK CPI came in well ahead of consensus, beating even the most hawkish of the 36 estimates collected in the Bloomberg survey. The headline rate hit 2.7 % y/y (cons. 2.4%, prev. 2.2%) vindicating the Bank of England’s decision not to extend the QE program last week. At the same time it raises the possibility of a somewhat hawkish quarterly inflation report due on Wednesday – although, as usual, Governor King’s interpretation at the subsequent press conference will be more important than the inflation fan charts themselves. Meanwhile in Greece, the Tbill auction was successful overnight, raising just over EUR 4 bn (almost EUR1 bn more than guidance). This cash will be instrumental in helping to repay EUR 5 bn worth of T-bills which mature on Friday. Although it is not yet clear from where Greece will find the balance of the cash, both Eurogroup Juncker and EU Commissioner Rehn were adamant overnight that there would be no default on Friday. Earlier, the meeting of Eurozone finance ministers concluded without any final decisions being taken on when (or indeed whether) to release the next tranche of Greek aid. Furthermore, divisions between the IMF and Europe were plain for all to see at the post-meeting press conference. IMF Managing Director Lagarde insisted that the goal of returning Greece’s debt-to-GDP ratio to 120% by 2020 should remain, while Juncker wants to give Greece until 2022 to reach that same target. Although two years may not seem like much, we note that it could have pronounced implications for all parties in the discussions, not to mention the remaining private sector bondholders. Juncker stressed however that ministers have not yet settled on any particular means to reduce the burden of Greek debt. It seems a breakthrough is still some way off with Eurogroup finance ministers now due to meet again on Nov. 20. There is also the possibility of a subsequent conference call on Nov. 28. Indeed Greece’s finance minister said he does not expect the aid to be disbursed until end-Nov or even early-Dec.
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