UK inflation stays flat as food prices tumble
UK inflation remained unchanged last month, the Office for National Statistics revealed on Wednesday, having been expected to rise slightly.
The consumer price index in October remained 2.4% higher year-on-year, as it was the month before. The Bank of England and the wider market had been expecting a rise to 2.5%.
On a monthly basis, CPI was up 0.1% for the second month in a row, though had been expected to climb 0.2%.
Recent increases in utility prices were an upward drive on inflation, but this was offset by a steeper fall in food prices than had been expected.
Core CPI, which excludes more volatile prices such as food and fuel, was again flat on a monthly basis 0.00% and up 1.9% on the year versus the 2% that economists had pencilled in.
Price pressures further up the supply chain eased off, with input price inflation falling to 10.0% from 10.5%, which should feed into the core rate of inflation in coming months.
"UK inflation data has heightened sterling speculation at an already sensitive time for traders," said Joshua Mahony, market analyst at IG.
"The stability in both headline and core CPI this month will come as a relief to the BoE who stated that they could raise rates in both the no-deal and deal Brexit outcomes. However, inflation is actually more important in the no-deal scenario, with a weak pound raising inflation and heaping pressure on the BoE. The recent decline in oil prices will certainly add downward pressure on inflation if it persists, yet for now the 2% target seems out of reach."
Economist Ruth Gregory at Capital Economics said the CPI figure supported the view that, "provided a Brexit deal is struck, inflation will probably be back at the 2% target next year".
Although input price inflation fell, Capital Economics still expects inflation to drift down further as the inflationary impact of sterling’s post-referendum fall continues to fade.
"Of course, much depends on Brexit," Gregory said. "In the event of a 'no deal' Brexit, we would not be surprised if inflation were to surpass 3% once more and remain persistently above the 2% target over the next years. But if a 'no deal' Brexit is avoided (which we still think is the more likely scenario), a further fall-back in inflation and a rise in nominal wage growth should spur a sustained consumer recovery next year."