CPI August update: Hymans Robertson comments

Commenting on the Consumer Price Index August update, Chris Arcari, Head of Capital Markets, Hymans Robertson, says:

“Headline inflation rose to 2.2% in July due to weakening energy price disinflation as energy prices fell less than they did in the same month last year. However, the pick-up in inflation was less than the 2.3% expected by economists and the Bank of England. Core and services inflation both fell more than expected, to 3.3% and 5.2% year-on-year, respectively. The underlying inflation data are consistent with elevated but easing underlying inflation pressures. We still expect the Bank of England to reduce rates further this year, but expect them to do so gradually, given the current decent growth backdrop and stickiness in underlying measures of inflation. Following today's release, market rate cut expectations increased, fully pricing in two further cuts by the end of the year, with gilt yields down modestly as a result and sterling weakening a little.”