U.K. Future Inflation Gauge Subdued
ECRI has just updated its United Kingdom Future Inflation Gauge (UKFIG). The value of this forward-looking gauge lies in its ability to predict cyclical turns in U.K. inflation.
U.K. CPI inflation has more than halved over the past year, but remains stubbornly above the Bank of England’s (BoE) 2% target. At the moment, the consensus expects the BoE to expand its bond-purchasing program in November. While many consider continued quantitative easing a necessity, action beyond November may be questioned if rising commodity prices are putting upward pressure on inflation.
The UKFIG’s latest update provides insights into the future trajectory of U.K. CPI growth, indicating whether BoE action will be hamstrung by inflation in the months ahead. While ticking up in August, the UKFIG stayed near June’s 35-month low. Thus, U.K. inflation pressures are still subdued.