20 Mar 2015
UK CPI on the verge of deflation – RBS
FXStreet (Barcelona) - Ross Walker, Senior UK Economist at RBS, expects UK CPI inflation to fall to a new low of 0.1% yoy in February, driven by petrol prices.
Key Quotes
“We expect CPI inflation to fall to a new low of 0.1% (y/y) in February. The move will be driven by petrol prices – though early data for March suggest a reversal so a dip into deflation is probably not yet on the cards.”
“Developments in core CPI are probably more informative at this stage – certainly, they are more representative of underlying price pressures in the domestic economy – and our forecast is for core inflation to edge down to 1.3%.”
“The sharp fall in BRC shop price inflation in February was driven by clothing and furniture and we expect some of this to be reflected in the ONS data.”
“The rise in the core CPI rate a month ago seems to be primarily a reflection of variations in the timing patterns over the Xmas shopping season (earlier ‘Black Friday’ promotions followed by less extensive discounting in January).”
“Separately, PPI data in February are likely to be dominated by the rebound in oil prices but deflation at the factory gate is likely to persist for most of this year.”
“Overall, the UK inflation outlook remains sufficiently benign to allow the BoE to maintain Bank Rate at 0.5% until Q1 2016.”
Key Quotes
“We expect CPI inflation to fall to a new low of 0.1% (y/y) in February. The move will be driven by petrol prices – though early data for March suggest a reversal so a dip into deflation is probably not yet on the cards.”
“Developments in core CPI are probably more informative at this stage – certainly, they are more representative of underlying price pressures in the domestic economy – and our forecast is for core inflation to edge down to 1.3%.”
“The sharp fall in BRC shop price inflation in February was driven by clothing and furniture and we expect some of this to be reflected in the ONS data.”
“The rise in the core CPI rate a month ago seems to be primarily a reflection of variations in the timing patterns over the Xmas shopping season (earlier ‘Black Friday’ promotions followed by less extensive discounting in January).”
“Separately, PPI data in February are likely to be dominated by the rebound in oil prices but deflation at the factory gate is likely to persist for most of this year.”
“Overall, the UK inflation outlook remains sufficiently benign to allow the BoE to maintain Bank Rate at 0.5% until Q1 2016.”