13 Jan 2015
Food and energy prices drag UK inflation to a 15 year low – ING
FXStreet (Barcelona) - James Knightley, Senior Economist at ING, expects UK CPI to fall further, with today’s release showing that the inflation dropped to 0.5% YoY in December, first time since May 2000.
Key Quotes
“UK Consumer Price Inflation has dropped to just 0.5% YoY in December versus 1.0% in November. This was below the 0.7% consensus forecast and is the lowest inflation reading since May 2000.”
“CPI is likely to fall further given the ongoing declines in the oil price and the highly competitive food retail environment.”
“Consequently, the Bank of England has plenty of room to leave monetary policy ultra-loose. Nonetheless, the BoE will likely emphasise that they look through temporary shocks and instead focus on the medium term inflation threat, since this is their remit – targeting inflation at 2% in 2 years’ time. They did this when CPI peaked at 5.1% in September 2011, keeping policy ultra-loose and continuing to buy government bonds as part of their Quantitative Easing programme.”
Key Quotes
“UK Consumer Price Inflation has dropped to just 0.5% YoY in December versus 1.0% in November. This was below the 0.7% consensus forecast and is the lowest inflation reading since May 2000.”
“CPI is likely to fall further given the ongoing declines in the oil price and the highly competitive food retail environment.”
“Consequently, the Bank of England has plenty of room to leave monetary policy ultra-loose. Nonetheless, the BoE will likely emphasise that they look through temporary shocks and instead focus on the medium term inflation threat, since this is their remit – targeting inflation at 2% in 2 years’ time. They did this when CPI peaked at 5.1% in September 2011, keeping policy ultra-loose and continuing to buy government bonds as part of their Quantitative Easing programme.”