Ahead of the UK CPI data being released tomorrow morning, Michael Field, chief equity strategist at Morningstar, has provided the following look ahead view on what we can expect:
“UK inflation is expected to fall ever so slightly in May to 3.4%, a minor but welcome move in the right direction. We might seem a world away from the Bank of England’s 2% targeted level for inflation, but once the effects of energy price cap increases roll off in the coming months, we should find ourselves much closer to this target than we are today.
Core inflation sits at an uncomfortably high level, albeit expected to fall by 20 basis points to 3.6%. Again, we believe these elevated levels are transitory, a view we also believe the BoE is taking when making upcoming decisions on interest rate levels. The risk of more structural rising inflation is real, but the recent trade agreement with the US should mitigate much of this risk.
Interest rates in the UK are still the highest in the western world, so the bank has plenty of room for manoeuvre, even if high inflation persists for a few months.”
If you would like to discuss this further, please let me know.
Best wishes, Mia
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