US: Housing starts rebound in February

In the US, the housing starts rebounded quite sharply (9% M/M) in February to 1525K following an even steeper drop (-14.3%) in January to 1399K. The rise was driven by the most important single family starts Building permits on the other hand fell lower to 1532K in February from 1571K in January, the lowest since December 1996. We would not draw too many conclusions from the rebound in the housing starts, as it comes on the heels of a huge drop and given the sustained weakness in building permits. The monthly data are notoriously volatile and noisy.

Other: UK CPI rises unexpectedly in February

In the UK, annual inflation rose to 2.8% in February from 2.7% in January. As such, UK annual inflation is still way above the medium term target of 2%. The increase in the annual inflation rate was not expected and will raise further concerns at the Bank of England, even while the bank expects inflation to fall rather sharply in the second half of the year. Core inflation remained however stable at 1.7% Y/Y. The inflation data raise the chance of another rate hike to 5.50% maybe as soon as April.

At the same time, the M4 money supply data showed that money supply growth remains buoyant growing at an annual rate of 12.8% Y/Y in February. Strong money supply growth is still a concern among the hawks in the MPC, as it may point to medium term inflationary pressures.