MNI DATA IMPACT: BoE Conundrum With Core CPI Below Headline Target>

By Les Commons and Laurie Laird 

     LONDON (MNI) -  Consumer price inflation slipped back to sit in 

line with the Bank of England's 2.0 target in May, although an extended 

decline in core inflation could stir some frank discussion amongst 

members of the Bank's Monetary Policy Committee.

     - Consumer price inflation declined to an annual rate of 2.0% 

in May, in line with the MNI median and Bank of England staff forecasts. 

     - One-off factors, largely a decline in transit fares after the 

Easter travel period, accounted for the bulk of the decline in annual 

CPI from 2.1% in April.

     - However, the sharp rise in crude oil prices through late April 

failed to feed into motor fuel costs, given an even greater surge in 

energy prices in the same period of last year.  

     - That base effect in crude oil prices contributed to a marked 

easing in intermediate price pressures. Output PPI declined to 1.8%, 

the lowest rise since September of 2016, while input PPI dropped to an 

annual rate of 1.3%, the slowest pace since June of 2016. 

     - The deceleration of intermediate price inflation, suggesting a 

potential decline in CPI in months to come, creates a dilemma for the 

Bank of England. Governor Mark Carney and Chief Economist Andy Haldane 

have repeatedly warned the markets to prepare for higher official 

interest rates. 

-London bureau: 44 (0) 203 865 3812; email: ukeditorial@marketnews.com

[TOPICS: M$B$$$,MABDS$]