VIEW: Deutsche Bank: A September Skip

Deutsche Bank note that “suddenly, the UK inflation picture looks a lot different than it did twenty-four hours ago.”

• “What does this mean for the MPC? In short, the August CPI print will give the MPC more optionality to pause in September.”
• “The big miss in inflation, alongside weaker growth momentum now stands in stark contrast to still sticky and elevated wage growth.”
• “Putting it altogether, we now think the case for a pause is slightly stronger. But either outcome won't surprise us tomorrow. More importantly, today's data will likely raise the odds of a dovish pivot to the Bank's forward guidance in September.”
• “Crucially, we don't think the hiking cycle is over just yet. A skip tomorrow, doesn't necessarily mean that the MPC is out of the woods. Despite weaker price pressures in August, price pressures further out are building. Energy prices are on the rise. And short-term inflation expectations look less anchored, according to the Bank's own Inflation Expectations survey (which came out last week).”
• “With market pricing falling considerably in the last week, more upward pressure on domestic inflation is likely too. This will give the Bank even less headroom to get CPI back to target, relative to its August projections. We will re-assess our call following the September decision.”