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Free AccessMNI DATA IMPACT: UK CPI Dips Below 1% As BOE Bailey Faces TSC
--UK headline inflation falls to 0.8% y/y
By Laurie Laird
LONDON (MNI) - UK inflation receded dramatically in April, falling below an
annual rate of 1% and hitting a level necessitating a letter from Bank of
England Governor Andrew Bailey to the Chancellor of the Exchequer to explain the
Bank's failure to meet its mandate.
The following are the main points from the April report on consumer and
producer prices released on Wednesday by the Office for National Statistics.
- CPI fell to an annual rate of 0.8%, the lowest level since August 2016.
It was the ninth month below the Bank of England's 2.0% forecast. That's the
biggest monthly decline in CPI since December 2008.
- When inflation has deviated from target in the past, letters to the
Treasury were released at the same time as the inflation report, as the Bank
received the data ahead of general release and can be expected later today.
- Excluding items in the CPI basket that are unavailable or scarce due to
the economic shutdown, CPI fell to an annual rate of 0.6%, with those items
exerting a downward influence of 0.23 percentage points on the change in CPI.
The price of more than one-fifth of the items in the basket (by weight) could
not be collected, leaving statisticians to impute the value of those items in
calculating headline CPI.
- Energy prices exerted a dramatic drag on CPI, with motoring fuels
contributing -0.31 percentage points to the change in CPI. Electricity and gas
prices subtracted 0.35 percentage points from the change in CPI as Ofgem
electricity price caps took effect in April.
- However, recreation and culture prices offset some of the downward
pressure, adding 0.19 percentage points to the change in CPI, with prices of
games consoles jumping by 7.7% in April, compared with a 2.2% fall a year
earlier. Statisticians also reported higher prices for dolls, teddy bears and
riding toys, due to increased to demand.
- Core CPI fell to an annual rate of 1.4% in April in line with
expectations, from 1.6% in March.
- RPI declined to 1.5%, falling slightly short of forecasts, to the lowest
level since May of 2016. RPIX declined to 1.6%, the lowest level since March of
2016.
- Plunging energy prices exerted downward pressure on intermediate
inflation, with crude oil falling by 34.1% between March and April and petrol
products declining by 10.2%, both record declines.
- Input PPI slumped by a record-high 5.1% in April, leaving input prices
down 9.8% on an annual basis, the biggest fall since December 2015. Output PPI
declined by an annual rate of 0.7%, the biggest fall since February 2016.
- The price of imported materials and fuels plunged by 6.2% between March
and April, the highest fall on record.
- Bank of England staff seemed to expect a less rapid fall in inflation.
Members of the Bank's Monetary Policy Committee expected a fall in headline CPI
below 1% "over the next few months" according to minutes of the May rate setting
meeting.
- A cast of Bank of England characters, including Governor Andrew Bailey,
will testify before the Treasury Select Committee later on Wednesday. The sharp
fall in inflation may stir more questions over the Bank's thinking about the
efficacy of negative interest rates in the UK.
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: MABDS$,M$B$$$,M$E$$$]
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.