The latest look at price pressures in the UK has shown a further drop with the consumer price index for November falling to 2.3% Y/Y - its lowest level since March 2017. While this decline was expected it provides further evidence that the spike in inflation caused by the depreciation in the pound following the Brexit referendum has passed through by and large after this metric peaked at 3.1% this time last year. A core reading which strips out volatile aspects like the impact of oil prices also fell, and now stands at 1.8%.
In terms of market reaction it has been understandably muted with economic data clearly having taken a back seat as far as driving the pound is concerned of late, with traders far more interested in the latest Brexit developments. On this front, the news flow has eased a little after last week’s bombardment and there is likely to be a bit of a lull before speculation is ramped up once more at the start of next year as the markets start to price in the chances of Theresa May’s deal getting passed.
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