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UK: Energy price cap adds around 0.06ppt more to headline CPI than BOE projected

UK
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  • Energy price cap is a little higher than expected at £1849. This is a 6% increase.
  • The BOE's forecasts had assumed that energy prices would be 7.51% higher than last year in its February MPR projections. The Y/Y increase in the price cap is actually 9.41% (so 1.90ppt higher than the BOE forecast).
  • Based on the CPI 2025A weights (note these will be revised in February to 2024B weights) where electricity and has have a 3.32% weight, we estimate that this increase adds around 0.063ppt to the BOE's forecasts for headline CPI between April and June.
  • That is less than a tenth of a percentage point, but enough to round the headline projections for both May and June up to 3.6%Y/Y to 1dp (April would remain at 3.6%Y/Y). Note that this does not take into account any other changes in prices, or changes the BOE made to its internal forecasts after the January inflation print was released.
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  • Energy price cap is a little higher than expected at £1849. This is a 6% increase.
  • The BOE's forecasts had assumed that energy prices would be 7.51% higher than last year in its February MPR projections. The Y/Y increase in the price cap is actually 9.41% (so 1.90ppt higher than the BOE forecast).
  • Based on the CPI 2025A weights (note these will be revised in February to 2024B weights) where electricity and has have a 3.32% weight, we estimate that this increase adds around 0.063ppt to the BOE's forecasts for headline CPI between April and June.
  • That is less than a tenth of a percentage point, but enough to round the headline projections for both May and June up to 3.6%Y/Y to 1dp (April would remain at 3.6%Y/Y). Note that this does not take into account any other changes in prices, or changes the BOE made to its internal forecasts after the January inflation print was released.