The UK inflation
Expert from Markit, Chris Williamson comments on the UK inflation.
“UK inflation held steady at 0.3% in May, adding to the view that no hike in interest rates is on the horizon and giving policymakers leeway to add stimulus to the economy if needed.
“Inflation has been stuck at 0.3% for most of the year to date, and only modest further upward movement is likely in coming months, meaning the headline rate looks set to remain well below the Bank of England’s 2.0% target for the foreseeable future.
“The consumer price index rose 0.3% on a year ago in May, according to the Office for National Statistics, signalling an unchanged the rate of inflation compared with April. Rising transport, communication and hotels & restaurant prices boosted the overall rate of inflation, offset by falling prices for clothing & footwear, recreation & culture activity and food & drink.
“Good prices were in fact 1.8% down on a year ago while prices for services were 2.6% higher.
“Core inflation, which excludes energy, food, alcoholic beverages and tobacco prices, also remained unchanged, holding at 1.2% in May to suggest no underlying upturn in price pressures.
“Looking ahead, the rise in the oil price is likely to add further to inflation in coming months, but subdued wage growth should help keep the headline rate down below the Bank’s target. Recruiters reported the lowest for two and a half years in May as demand for staff cooled and low inflation kept wage bargaining power down. The exchange rate is more of an unknown, and much of course depends on the outcome of the June 23rd referendum. A further fall in the value of sterling will drive up import costs.”