United Kingdom: Core CPI resilience complicates BoE path – Nomura

Nomura strategists analyse the latest United Kingdom (UK) June inflation data, noting headline Consumer Price Index (CPI) fell to 2.6% as the Bank of England expected, but core and services inflation stayed sticky. They attribute this to falling food prices offset by strength in information processing equipment and hotel/catering, and highlights a sharp rise in upstream services prices, especially transport and storage.

Headline falls but core stays sticky

"While UK headline inflation fell by 0.2pp between May and June, as the BoE had expected, core and services inflation proved more resilient than the consensus view."

"This morning's UK June inflation numbers were all above our forecasts, but the headline rate fell 0.2pp to 2.6% – which was below consensus."

"Services inflation only fell a tenth, to 3.6%, versus consensus forecasts of a 0.2pp drop and our view of a 0.3pp fall."

"Core inflation turned out to be unchanged at 2.6% in June."

"In short, this is not as good a set of figures as we had expected but there are really only two major components that were responsible for the upside miss in core inflation, rather than a broad array of the CPI basket."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)