MNI UK Inflation Insight

• Both headline CPI and services CPI surprised the consensus to the downside by a tenth (although core CPI surprised to the upside by a tenth). The main surprises to the consensus were in the volatile restaurants and hotels category and also a larger-than-expected fall in food prices. However, compared to the Bank of England’s forecasts there was a broader downside surprise (a 3 tenths downside surprise to services CPI).
• We look through some of the key drivers of the print and the key surprises to consensus.
• Given that services CPI was 3 tenths weaker than the BOE expected this looks as though it was a must have been a broad-based downside surprise to the Bank. However, versus consensus the volatile overnight accommodation category could potentially be reversed next month – there is still more disinflation in food prices but that alone is not really enough to change the narrative. This should increase the chance of a cut around May next year - but again, probably isn't enough of a downward surprise to see much chance of an earlier cut get any significant pricing. We are also likely to see further inversion throughout the curve.

We also summarise over 10 sell side views and include a CPI chart pack. For the full PDF click here.For the full PDF click here.