Falling CPI to Provide Relief For MPC, But..>

UK DATA: Falling CPI to Provide Relief For MPC, But for How Long?

-UK Aug CPI +1.7% y/y vs +2.1% in July

-UK Aug Core CPI +1.5% y/y vs +1.9% in July

-UK Aug RPI +2.6% y/y vs +2.8% y/y in July

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CPI fell to an annual rate of 1.7% last month, undershooting the 1.9% 

Bloomberg median forecast, making more comfortable reading for the BOE 

MPC as it considers interest rates today. That's the slowest pace since 

December 2016, while core inflation hit its lowest level since September 

2016. The volatile recreation and culture component accounted for 0.15pp 

of the change in CPI. The sector accounts for 15.5% of the CPI basket, 

greater than any other component, and has been a key driver of 

inflationary change in recent months. However, the 3.4% annual fall in 

the sterling effective exchange rate, biggest since August of 2017, 

could point to inflationary pressures in months to come, although the 

ONS was non-committal.