CPI fell by 0.1% m/m in May pushing inflation down to 1.5% y/y, clearly below expectations. The main contribution to the decrease came from the transport costs (air fares, sea fares and motor fuels). Other large downwards effects came from food and clothing.
We believe that today’s figures will to some extent balance the recent statement made by Governor Carney that a first rate hike “…could happen sooner than the markets currently expect”. Despite better growth prospects the below target inflation suggests that a rate hike is still remote.
Details, CPI Inflation May:
CPI, m/m: -0.1 % (Nordea: 0.2%; consensus 0.2%; prior 0.4%)
CPI, y/y: 1.5% (Nordea 1.7%; consensus 1.7%; prior 1.8%)
Nordea