MNI DATA IMPACT: Oct CPI Below Target; Further Fall in Sight>

By Laurie Laird and Irene Prihoda

     LONDON (MNI) - Inflation fell by more than expected on both 

consumer and pipeline levels in October, suggesting that doves on the 

Bank of England's Monetary Policy Committee could have the upper hand in 

future interest rate deliberations. 

     The following are the key points from inflation data published 

Wednesday by the Office for National Statistics. 

     -- Consumer price inflation slipped to 1.5% in October, falling 

short of expectations, dampened by the introduction of new energy price 

caps at the beginning of October. Subdued utility prices shaved 0.22 

percentage points from the change in the CPI. 

     -- Core CPI rose by 1.7% for the second straight month, well below 

the Bank of England's 2.0% target, suggesting subdued inflationary 

pressures throughout the wider economy.  

     -- The sterling effective exchange rate rose by 2.2% between 

September and October, bringing the gain over the past two months to 

4.7%, potentially capping imported inflation in months to come. 

     -- Intermediate inflation was also weak, dampened by falling costs 

of crude oil and petroleum products between September and October. Input 

PPI declined by 5.1%, the largest slump since April 2016, while output 

PPI rose by 0.8%, the smallest rise since August 2016. 

     -- Core output PPI rose by just 1.3%, suggesting softness in 

intermediate pricing away from volatile energy products. 

     -- The easing of inflationary pressures across the board highlights 

the risk that inflation could fall to the 1.25% level envisioned by the 

Bank of England well ahead of the forecast horizon of Q2 2020. 

     -- House price inflation also remained weak, with the HPI rising by 

just 1.3% in September, matching the August gain.  London prices slid by 

another 0.4%, the 19th straight month without an increase. However, 

London prices have rebounded modestly in cash terms from their trough in 

May. 

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

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