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UK CPI: A touch stronger than expected, no clear steer for BoE in November

18th October 2023

Commenting on the Consumer Price Index (CPI) published today, Royal London Asset Management’s Senior Economist, Melanie Baker, said:

“Headline inflation is still likely to fall quite a lot further. Powerful negative base effects from electricity and gas bills which rose a lot last October should pull energy and headline inflation down further in October. I’d expect core inflation to follow past falls in energy inflation lower with a lag. Input price data still look consistent with further falls in core goods price inflation to me. I still expect a modest recession in the UK and for a looser labour market and well-behaved inflation expectations to see lower pay growth next year.

“Domestically-driven inflation still looks strong for now though. Year-on-year services inflation rose. Although that came from a few rather than many services categories, the rate of services inflation remains very high. Pay growth remained strong on the data released yesterday too of course, though the labour market figures released so far this month look consistent with a less tight labour market.

“The Bank of England has continued to signal that if inflation pressures prove persistent then it will likely tighten monetary policy further. Headline inflation is still running a bit below the staff forecast from August. A rise in services inflation isn’t a source of comfort though; the Bank of England has repeatedly been putting a lot of emphasis on services inflation. In the context of still strong domestic inflation pressure, I have been expecting the Bank of England to hike rates once more by the end of the year.”


The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.