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Meaningful CPI miss to the downside

UK DATA
  • So overall the drivers of the surprise:
  • Services: Recreation and culture the biggest downside surprise - with computer games and theatre/concert ticket prices with notable contributions. Some of this might rebound in December. Accomodation prices didn't rebound as much as some expected - this barely got a mention in the CPI press release - but seems as though it could be a more persistent change. Still some scope for a bit more of a rebound in December though. So some of the weakness in services CPI could rebound - but probably not 0.6ppt to get us near to the BOE's Nov MPR forecast.
  • Food prices a bit on the softer side of expectations and transport prices falling more than expected with larger falls in second hand card prices than had been pencilled in. They don't seem to be things that are as likely to be susceptible to a rebound.
  • So this is a meaningful miss to the downside. If we get another similar miss in the December data (which is also before the Feb MPC meeting) we would expect to see a good chance that at least some of the hawks vote for unchanged rates - and the chance of Dhingra voting for a cut in February has risen.
  • We could get another leg lower for the pound when UK STIR markets open at 7:30GMT.
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