UK: inflation in May-20 approaches its trough
- UK inflation data matched expectations for the CPI to slow to 0.5% y-o-y while the RPI was 18bp below my forecast at 1.04%. The latter surprise occurred as MIPs returned to reality after an acknowledged official mistake.- Energy does not appear to be rising to the expected extent as wholesale prices rebound, and alcohol price declines in Jun-20 weigh further on my forecast.
- The trough in my CPI forecast has fallen by 0.1pp since last month’s release to 0.4% in July, but I do not expect the RPI rate to dip below 1%. A prolonged period of well below-target inflation provides plenty of space for the MPC to stay dovish.
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