Please see below, an update from EPIC Investment Partners which details the latest UK inflation figures and the possible policy implications for the Bank of England and the UK government. Received yesterday morning – 18/10/2023
UK inflation remains entrenched and at the highest levels of the G7 nations according to the latest figures released today. September’s headline CPI was up 0.5%mom, in-line with expectations, but higher than August, due to the jump in oil prices. Year-on-year, the figure came in above expectations at 6.7%. The core reading eased to 6.1%yoy, while services heated up to 6.9%yoy.
Given that inflation is below the BoE’s 6.9% August projected figure, coupled with the easing labour market, at this stage, there is little evidence to suggest the BoE will hike at the next meeting in a couple of weeks. The central bank will, however, need to consider the fact that wages overtook inflation in September. The market is currently pricing a 50/50 probability of another hike this year, and a higher chance of a hike in February 2024.
“As we have seen across other G-7 countries, inflation rarely falls in a straight line, but if we stick to our plan then we still expect it to keep falling this year,” the Chancellor of the Exchequer Jeremy Hunt said. PM Sunak Tweeted: “Tackling inflation remains my number one priority as Prime Minister…. We’ve made great progress, but I know there is still a way to go…. We will stick to our plan and get it done.”
September inflation prints are used as a benchmark in setting certain benefits, which will be announced in April. These latest figures suggest that welfare recipients will receive a generous uplift in payments next year.
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Alex Kitteringham
19th October 2023