Monday, November 16, 2015

UK CPI Preview: Deflation to persist for another month – RBS

FXStreet (Delhi) – Ross Walker, Senior UK Economist at RBS, suggests that the UK CPI inched into deflation in September, to -0.1% (% y/y), and expect it to remain at that levels in October as well.

Key Quotes

“Core CPI components have been relatively stable in recent months and survey data suggest little change so we forecast a steady 1.0% y/y. On our forecast, October’s data mark the low-point for UK inflation, but there is little sense of any imminent, sustained surge.”

“The widely anticipated base effect blip higher in CPI around the turn of the year is not ‘news’, nor will it tell us much about the trajectory for CPI in the remainder of the year – though brace yourself for risible City/media commentary about surging price pressures.”

“The global economic backdrop means commodity and manufactured goods price pressures are likely to remain fairly muted and there is still scant evidence of any marked acceleration in UK wage inflation. We expect CPI to remain below its 2.0% target until around mid-2018, lessening the pressure on the BoE to deliver an early hike.”
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