UK: Inflation outlook still looks relatively benign – ING

James Smith, developed markets economist at ING, explains that at 1.7%, UK’s headline inflation was held back during September by a modest fall in fuel prices.

Key Quotes

“But with energy stripped out, core CPI bounced back to 1.7% on favourable base effects, as well as some quirks in furniture and recreation costs. In the short-term, the outlook for inflation still looks relatively benign – headline CPI is likely to stay below 2% for the rest of the year.”

“Now, inflation is clearly not the biggest game in town today. But all of this fits into a broader debate about how the economy will shape up depending on how Brexit pans out in the coming days.”

“We don’t think we’re there yet – after all with productivity growth minimal, the level of wage growth is currently more than sufficient (in theory) to keep core inflationary pressures rising. But even if there is a deal this week, the considerable uncertainty over the future relationship with the EU will persist. These concerns, coupled with growing worries about the global economy, will continue to weigh on UK growth in 2020.”