UK inflation: Deutsche Bank sees further upside

Deutsche Bank economists Sanjay Raja and Maui Brennan expect UK inflation to move higher in October, driven by energy, tobacco and modest food and services gains. They forecast headline CPI at 3.80% year-on-year, with Core CPI and Services CPI also rising. Looking ahead, they see headline CPI pushing closer to 4.25% early next year, with price pressures remaining sticky.

Deutsche Bank flags renewed inflation pressures

"After broadly matching expectations in September, we expect UK inflation to rise further in October."

"What’s the story? The October inflation story will feature three main drivers. First, energy prices are set to push even higher as we enter the final quarter of the year, with the Ofgem Price Cap up, heating oil prices up, and petrol and diesel prices up too. Second, tobacco duty will also be a prominent feature of the October inflation report, with higher duties on vapes and tobacco kicking in."

"Where do we see inflation going in October? We expect headline CPI to have risen to 3.80% y-o-y (Sep-26: 3.48%). Core CPI, we think, will have jumped by 2.87% y-o-y (Sep-26: 2.78%). Services CPI, we project, will have edged up to 3.87% y-o-y (Sep-26: 3.72%)."

"Looking ahead, more inflation is coming. We continue to see headline CPI pushing closer to 4.25% y-o-y at the start of next year. Headline prices will also likely remain sticky, as food prices push higher, and core goods start to see some of the impacts of higher energy prices impact retail prices."

"Index-linked price rises will also keep services momentum from slipping too far."

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