UK inflation looks set to rise further in the October - Nomura

According to analysts at Nomura, UK inflation looks set to rise further in the October report and they have a forecast for CPI inflation of 3.1%, compared with the Bank of England’s view (in its Inflation Report) of 3.2%.

Key Quotes

“One of the reasons we do not expect inflation to rise further is that petrol prices fell during the month despite the rise in the price of oil. Combined with negative base effects (petrol rose in October a year ago), this is enough to have a -0.1pp impact on the headline rate of inflation. We think a 3.1% reading in October will prove to be the peak in inflation. It would also require the BoE to write an open letter to the Chancellor to explain the overshoot and the Bank’s plans to correct it.”

“Producer prices: Evidence from the PMI survey in October showed output prices rising at their fastest rate for six months (the CBI equivalent was less strong), which explains our forecast of an acceleration in core output price growth to 0.3% m-o-m during the month. Petrol prices fell in October despite rising oil prices, which explains our slightly weaker headline output price print of 0.2% m-o-m. As for input prices, rising oil prices and a fall in GBP/USD during the month point to a rise of around 0.5% m-o-m.”