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TD Securities flags UK inflation upside risks ahead of July CPI

TD Securities expects headline UK CPI to jump to 2.9% year-on-year in July, with the Ofgem energy price cap adjustment driving the increase, while core CPI is seen steady at 2.6%.

Reported · Written up by our desk · Central Banks

TD Securities’ Julie Ioffe expects UK headline CPI to rise to 2.9% year-on-year in July, citing the Ofgem energy price cap adjustment as the main driver behind the move.

In the breakdown, services inflation is forecast to ease to 3.4% year-on-year, while core goods inflation is expected to pick up to 1.0% year-on-year. Taken together, TD Securities sees core CPI holding steady at 2.6% year-on-year.

The bank also highlights upside risks to the inflation outlook beyond energy, including potential re-acceleration in food prices tied to fertilizer costs and adverse weather, and airfare inflation as airlines look to recover higher fuel costs through post-summer ticket prices.

TD Securities adds that if wage pressures remain contained despite the slightly higher path for headline inflation, the Bank of England is more likely to keep Bank Rate on a prolonged hold rather than hike further, based on its view of a loosening labour market and reduced bargaining power.

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