UK: Sharp fall in core inflation unlikely to last long – ING

James Smith, developed markets economist at ING, points out that at 1.5%, UK core inflation fell reasonably sharply in August and came in quite a bit below market expectations for 1.8% year-on-year.

Key Quotes

“This now sits at the lowest level since late-2016, although there are few reasons why this shouldn’t be overstated.”

“Firstly, some of the fall was down to unusual volatility in the price of games & toys. Having risen by the fastest monthly rate since the 1980s back in July, the price of these recreational goods fell back by 5% during August. Secondly, clothing prices didn’t increase as rapidly as they did at the same time last year. Elsewhere, price changes appeared more ‘normal’ and we expect to see core inflation nudge a bit closer to target over the next couple of months, particularly in light of fairly favourable base effects.”

“Either way, the outlook for consumer prices still appears fairly benign - even when considering the latest increase in oil prices.”

“Given services make up a sizable share of the UK inflation mix, and these items tend to be fairly labour-intensive, these higher wage costs could feasibly translate into a bit of upward pressure for consumer prices in the medium- term.”

“This is the main reason why the Bank of England will likely retain its notional tightening bias at tomorrow’s meeting – and also suggests it’s too early to pencil in rate cuts in the UK. Equally though, the ongoing uncertainty surrounding Brexit, and mounting concerns over global growth, suggests the prospect of any further policy tightening is also still quite a long way off.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Forex News

Editors’ Picks

EUR/USD pressured around 1.13 after jump in US jobs

EUR/USD is trading around 1.13, down after US Non-Farm Payrolls shocked with a leap of 2.5 million jobs in May, contrary to all projections. The greenback is gaining while stocks are falling, a correlation breakdown. ECB stimulus previously supported the euro.


GBP/USD retreats from highs

GBP/USD is trading below 1.27, off the highs. The pound is struggling after Chief EU Negotiator Barnier reported little progress in Brexit talks. Robust US jobs support the dollar.


XAU/USD retreats further to $1670, lowest in five weeks

Gold prices are falling sharply on Friday on the back of the US employment report that boosted equity markets and sent US yields to the upside. XAU/USD is losing more than $40 on Friday and recently bottomed at $1670/oz, the lowest intraday level since May 1.

Gold News

Institutional demand exceeds Bitcoins supply

Greyscale floods the market with fresh money to satisfy the demand of its clients. Investors, willing to pay a 29% surcharge for exposure to Bitcoin without suffering the legal and operational inconveniences. Market remains at risk on the verge of new bullish territory.

Read more

WTI rallies above $39 as focus shifts to OPEC+ meeting

Crude oil prices built on Thursday's modest gains and rose sharply on Friday boosted by the upbeat market mood optimism surrounding Saturday's OPEC+ meeting. 

Oil News