RPI inflation will rise even more than CPI inflation in April, due to the bigger weighting of energy prices.
But house price growth is about to slow, while mortgage interest payments will rise only slowly.
Weighting differences point to a bigger drag on RPI inflation from falling energy prices next year.
Samuel Tombs (UK Economist)U.K.
We look for two further 25bp increases in Bank Rate this year, not one, after March's jump in CPI inflation.
CPI inflation looks set to peak at about 9% in April and remain above 8% until the very end of this year.
But energy and core goods inflation will plunge next year; the MPC needn't be as active as markets expect.
Samuel Tombs (UK Economist)U.K.
We think CPI inflation rose by 0.5pp to 6.7% in March, well above the "around 6%" range expected by the MPC.
Motor fuel prices jumped, while PPI data point to further increases in food and core goods CPI inflation.
Services businesses also are passing on higher costs; rail fares and rents rose more than usual too.
Samuel Tombs (UK Economist)U.K.
- GDP is set to fall in Q2, as Covid-related government spending declines and real incomes drop sharply.
- Energy prices currently point to CPI inflation rising to 8.5% in April, and returning to that level in October.
- Markets have revised up their rate expectations, mistakenly overlooking key comments in the MPC's minutes.
Samuel Tombs (UK Economist)U.K.
- February's CPI inflation data won't panic the MPC, services inflation merely matched its long-run average.
- The further surge in oil prices and producer prices suggests that CPI inflation will rise to 8.6% in April...
- ...and will rise to a similar rate in October, after easing in Q3; the MPC, however, will worry more about demand.
Samuel Tombs (UK Economist)U.K.
- Tax and benefit changes will lop 1.3% off disposable incomes in 2022-23, despite Mr. Sunak's new tax cuts.
- The Chancellor could have been bolder; he has more headroom against his fiscal targets than in October.
- Don't bank on extra pre-election tax cuts; the OBR is too upbeat on households' spending and productivity.
Samuel Tombs and Gabriella DickensU.K.
- We expect the OBR to revise up its "pre-measures"2022/23 public borrowing forecast by £3B to £86B...
- ...But Mr. Sunak's headroom in meeting his three-year ahead rules will not decline; inflation will ease in time.
- The Chancellor, however, will want to preserve this headroom to cut taxes just before the next election.
Samuel Tombs (UK Economist)U.K.
- January's rebound should ensure GDP rises by nearly 1% q/q in Q1, far exceeding the MPC's expectations.
- But Test & Trace and vaccination activities boosted GDP by 2% in January; this support soon will gone.
- Q2 GDP also will be hit by the extra bank holiday and a sharp fall in real incomes; we look for a 0.2% q/q drop.
Samuel Tombs (UK Economist)U.K.
- We think CPI inflation rose to 6.1% in February, from 5.5% in January, above the MPC's 5.9% forecast.
- Eurozone data signal a further sharp increase in core goods inflation; food inflation likely rose too.
- Surveys point to a further large month-to-month increase in services prices.
Samuel Tombs (UK Economist)U.K.
- This week's surge in energy prices, if sustained, will boost the CPI by an extra 1.5 percentage points.
- Households' real disposable incomes now are set to fall by about 2.2% this year, the most since WW2.
- Below-trend GDP growth lies ahead, which will obviate the need for much higher interest rates.
Samuel Tombs (UK Economist)U.K.
- We think CPI inflation rose by 0.1pp to 5.5% in January, but annual weight changes increase the uncertainty.
- Core goods prices surely leapt; data from the Eurozone and the U.K.'s BRC point to a very large increase.
- A base effect likely depressed accommodation services inflation, but wider services inflation is trending up.
Samuel Tombs and Gabriella DickensU.K.
- We are bringing forward our forecast for the next two increases in Bank Rate, following December's CPI data.
- While food, energy and goods prices are mainly to blame for high inflation, services inflation has risen too.
- CPI inflation, however, will fall sharply in H2 and should be below target in 2023, curtailing the hiking cycle.
Samuel Tombs (UK Economist)U.K.
- CPI inflation probably was unchanged at 5.1% in December, giving the MPC some breathing space.
- Pick-ups in food and used car price inflation likely were offset by falls in the tobacco and clothing components.
- The seasonal surge in plane ticket prices will boost the CPI less than usual, because its weight has shrunk.
Samuel Tombs (UK Economist)U.K.
- We think that GDP increased by about 0.6% month-to-month in November, above the 0.4% consensus.
- Easing supply-chain blockages seem to have facilitat- ed pick-ups in manufacturing and construction output.
- Growth in services output was supported by increas- es in retail sales, transport usage and vaccinations.
Samuel Tombs (UK Economist)U.K.
- The default tariff energy price cap looks set to rise by 47% in April, pushing up CPI inflation to 6.2%.
- The rise will be larger, if suppliers are immediately compensated for acquiring failed competitors' customers.
- Removing VAT would limit the inflation peak to 6.0%; a supplier loan scheme could have a bigger impact.
Samuel Tombs (UK Economist)U.K.
November's 5.1% CPI inflation rate was 0.6pp above the forecast made by the MPC only last month...
...But high inflation is due to surging energy and goods prices; underlying services inflation remains subdued.
We expect the headline rate to peak at 6.0% in April, but then to fall sharply, slipping below-target in 2023.
Samuel Tombs and Gabriella DickensU.K.
- CPI inflation likely rose to 4.8% in November—0.3pp above the MPC's forecast—from 4.2% in October.
- Used car prices still are rising rapidly, while supermar- kets are passing on higher food prices to shoppers.
- Tobacco prices were lifted by a duty hike, while cloth- ing CPI inflation likely was boosted by a base effect.
Samuel Tombs (UK Economist)U.K.
- The MPC would ease monetary policy again in the unlikely event that another lockdown is imposed.
- Fiscal policy would be less supportive than in previous lockdowns; new curbs would dampen inflation.
- Negative rates are in the toolkit and are preferred to more QE; Bank Rate likely would be cut to -0.25%.
Samuel Tombs (UK Economist)U.K.
- Capex failed to pick up at all in Q3, as firms struggled to get their hands on transport equipment.
- Firms, however, appear keen to invest and have the financial resources, so a rebound remains likely.
- We expect capex to rise by about 10% in 2022 and 4% in 2023, eventually returning to 2019's level.
Samuel Tombs (UK Economist)U.K.
- October's rise in retail sales volumes was driven solely by people buying Christmas presents earlier than usual.
- Consumers' confidence recovered in November, but still is below-average, and will drift down over the winter.
- A large minority of people remain fearful of Covid; rising cases likely will instil greater caution over the winter.
Samuel Tombs (UK Economist)U.K.
