UK: Disinflation path intact as CPI nears target – Deutsche Bank

Deutsche Bank’s Chief UK Economist Sanjay Raja notes that UK inflation fell to 3% year-on-year, its lowest level since March 2025, driven by weaker core goods and food prices, while services inflation remains sticky at 4.4%. Raja still expects the disinflation path to hold, with CPI moving closer to 2% by spring and price momentum easing further into Q2-26.

CPI seen drifting toward 2 percent

"Despite stronger services price momentum to start the year, we see CPI taking another big step down in spring, as some of the big administrative prices wash out of the annual rate calculation."

"We expect CPI to track nearer 2% by spring."

"As some of the big price rises drop out of the annual rate calculation, slower administrative price rises will, by and large, see inflation (particularly services) drop lower through Q2-26, settling just around target."

"Altogether, we see price momentum slowing from around 3% y-o-y in Q1-26 to just over 2% y-o-y in Q2-26."

"We expect small upward gyrations through the year but see price momentum staying range bound between 2.2% y-o-y and 2.5% y-o-y."

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