MNI DATA IMPACT: Falling UK CPI Gives BOE Pre-Brexit Leeway>

By Laurie Laird and Irene Prihoda 

     LONDON (MNI) - Consumer price inflation fell well below the Bank of 

England's target in August, but the relief could be short-lived, with 

sterling sliding to its lowest level in almost two years. 

The following are the key points from inflation data released Wednesday 

at the Office for National Statistics. 

     - Consumer price inflation declined to an annual rate of 1.7%, well 

below the Bloomnberg median forecast of 1.9% and the Bank of England 

target of 2.0%. The data hit as the Monetary Policy Committee considers 

interest rates, with its decision to be announced Thursday. 

     - Rate setters have been coy about the future direction of interest 

rates, despite the current economic slowdown. Investors are likely to 

regard Wednesday's data as a strong signal that rates are more likely to 

fall in the event of a deepening Brexit-related slowdown. 

     - Intermediate inflation declined to near two-year lows, courtesy 

of a fall in crude oil prices, but sterling weakness could complicate 

rate decisions later in the year. The sterling effective exchange rate 

fell for the fifth straight month in August, or by 3.4% on an annual 

basis, leaving the measure at its lowest level since October 2016.  

     - The decline in annual CPI from 2.1% in July marked the biggest 

month-to-month slowdown in almost five years. 

     - Culture and recreation costs provided the biggest downward 

pressure on consumer prices, subtracting 0.19 percentage points from the 

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

the biggest single component, complicating efforts to discern the true 

extent of underlying price pressures. 

      - UK house prices rose by an annual rate of 0.7%, the smallest 

increase since September 2012. London prices continued to decline on an 

annual basis, the 18th straight month without an increase. London prices 

have fallen by a cumulative 4.9% since peaking in July of 2017. 

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

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