UK still in Deflation


The ONS reported that prices declined 0.1% from a year earlier. That’s the third negative reading this year. Reading mainly reflects weaker global commodity costs. Core reading (without food and energy prices) rose 1.1% from 1.0% mainly on the back of the apparel sector.

Still the positive reaction on GBP might prove to be short-lived as the data is hardly supportive for BoE which expects inflation to remain low into 2016 before picking up toward its 2 percent target.  Inflation is likely to accelerate beyond October with less impact od past falls in oil yet it is still unlikely to force BoE to begin monetary tightening in first two quarters of 2016.