UK: disinflation in Apr-20 confirms dovish space
- UK inflation data slowed sharply in April, but the 110bp fall in the RPI was only 2bp more than I expected, as the index rounded down to stay at 292.6 instead.- Clothing’s record price decline, together with a surprise cheapening in financial services, weighed especially heavily on the CPI. That news was offset in the RPI by MIPs’ failure to fall as rates did, probably because of product churn.
- Another slight decline remains likely in May, ahead of reaching my forecast trough of 0.5% y-o-y on the CPI in Jul-20. The depth of the decline and duration below-target provides the BoE with a clear dovish path, despite less bleak activity data.
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