UK inflation: seasonal smash shouldn’t dissuade BoE
- Inflation in Jun-18 disappointed consensus expectations again as it held at 2.4% on the CPI and only rose to 3.4% on the RPI. Clothing and recreation were responsible, which are prone to payback but not necessarily in the next month.- Earlier summer sales in clothing should shrink the extra discounts in July and raise the rebound into Sep-18. Games & toys weakness was partly associated with a temporary lack of churn in computer games charts reducing average pricing.
- Despite headline disappointment, domestic cuts of the CPI and its median remain relatively robust. Outcomes are also close to my older forecasts and the BoE’s May one, so should not dissuade it from finding the outlook broadly in line and hiking.
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