UK: Surprise inflation fall may stall MPC hawkishness – HSBC

UK CPI inflation dropped unexpectedly in June, to 2.6% y-o-y from May's 2.9% while the core rate also fell, to 2.4% y-o-y from May's 2.6% which is likely to stall the recent MPC hawkishness, according to Chris Hare, Economist at HSBC.

Key Quotes

“RPI inflation edged down by 0.2ppts, to 3.5% y-o-y. The main causes of the softening were an easing in energy base effects and an unwinding of last month's surge in recreational goods prices. But the easing was not broad-based and, with some of the impact of sterling weakness still to feed through, inflation is likely to remain elevated for a while. Still, yesterday's weaker print will embolden the doves on the MPC, consistent with our view that Bank Rate will remain on hold this year and next.”