UK CPI Inflation Stubbornly High as Iran Risk Lifts BoE Cut Odds

Preliminary analysis for February 2025 suggests UK CPI inflation remains stubbornly high above the Bank of England’s 2% target. Core inflation is especially resilient, with fewer signs of disinflation than markets hoped. Key drivers cited include elevated services inflation linked to strong wage growth, sticky goods inflation despite improving supply chains, and continued upward pressure from housing costs. Official ONS figures are due later this month, but business surveys and price trackers point to limited progress. Geopolitical risk is a major complicating factor. Escalation tied to Iran is expected to add upward pressure via energy markets and shipping costs. The article notes higher volatility in oil prices, with Brent crude futures testing higher levels. Since the UK is a net energy importer, sustained oil strength could lift transportation and production costs and filter through to consumer prices. It also highlights that roughly 20% of global oil shipments pass through the Strait of Hormuz, while regional insurance costs have already risen. For the Bank of England’s Monetary Policy Committee (MPC), the dilemma is clear: sticky domestic inflation argues for staying restrictive, while external shocks could delay the return to target inflation. Recent MPC minutes are described as showing heightened attention to international developments, and market pricing implies the first interest-rate cut may come later than previously expected. Compared with other major economies, the UK is framed as more sticky than the US (which is disinflating faster) and broadly similar to the Eurozone, reflecting energy-import exposure and labor-market dynamics. For crypto traders, the takeaway is that persistent UK CPI inflation and renewed energy risk raise the odds of tighter-for-longer policy, which can pressure risk assets through higher real rates and volatility in macro conditions.