UK inflation: Wile E. Coyote moment in Mar-20
- UK inflation data were relatively stable in Mar-20, with the CPI dipping to 1.5% while the RPI surprisingly increased to 2.6% y-o-y. Clothing prices were weak as demand disappeared, but transport prices were remarkably resilient.- A slew of substantial disinflationary shocks hit in April. Weakness in petrol and airfares appears more backloaded, Ofgem and Ofwat regulated cuts, council tax increases were smaller, and banks slashed mortgage rates after the BoE cuts.
- So, a bit like Wile E. Coyote, the inflation data are currently running on thin air and are set to crash in the next release. Underlying rates remain healthy, but the depth of the decline and duration below-target provides the BoE with dovish cover.
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