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UK CommentUK consumer price inflation eases in May

  1. CPI down to 2.0% and core CPI down to 1.7%
  2. Cost pressures also ease in May
  3. Inflation trend should not affect BoE’s decision – policy to be kept unchanged tomorrow
CPI down to 2.0% and core CPI down to 1.7%
UK CPI inflation was 2.0 percent y-o-y in May, down from 2.1 percent in April. This was in line with the consensus expectation. Core CPI inflation, however, was slightly higher than the consensus (1.6 percent) at 1.7 percent y-o-y, but still down from 1.8 percent in April. By far the largest downward contribution to the easing 12-month rate came from transport, with the April prices influenced by Easter and the associated school holidays falling in the middle of the month. However, according to the ONS, cost pressures fell further with PPI input inflation down to 1.3 percent y-o-y from 4.5 percent in April. PPI output inflation fell to 1.8 percent y-o-y in May from 2.1 percent in April. When it comes to cost pressure ahead, the PMI surveys indicate it could remain rather subdued.
Inflation trend should not affect BoE’s decision – policy to be kept unchanged tomorrow
The Bank of England (BoE) in May expected inflation to ease ahead, and it is too early to say if the inflation trend deviates from the BoE’s forecast. The monetary policy committee of the BoE will meet tomorrow, and will probably keep monetary policy unchanged. In any case, we believe the BoE will sit perfectly still as long as the Brexit uncertainty remains elevated and the risk of a no-deal Brexit remains significant.


 


 


 


Disclaimer

Kari Due-Andresen

Chief Economist Norway

Norway and UK

kadu01@handelsbanken.no

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