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Deutsche Bank warns UK inflation risks remain tilted upward

Deutsche Bank expects UK CPI to peak near 3.0% later this year, citing further energy inflation potential and firmer services pricing.

Reported · Written up by our desk · Inflation

Deutsche Bank UK economist Sanjay Raja said recent UK inflation data broadly met expectations, with headline CPI rising and core CPI holding steady in July. The July headline CPI increased to 2.9% year over year, up from 2.6% in June, while core CPI stayed at 2.6% year over year, according to FXStreet.

Raja pointed to energy price gains driven by the Ofgem Price Cap and base effects as key contributors, while food and services inflation eased. Services CPI slowed to 3.4% year over year from 3.6% in June, and food inflation fell to its lowest rate since late 2021, FXStreet added.

Looking ahead, Raja said upside risks to CPI remain, with energy prices viewed as poised to rise further and services inflation expected to edge up. FXStreet reported the firm expects CPI to peak near 3.0% year over year later this year, and warned risks for the UK’s monetary policy committee remain skewed to the upside.

For the MPC, Raja said the bank can stay on the sidelines for now, but cautioned not to expect a change in sentiment. He flagged persistent price momentum unease across the Bank’s core services measures and said further increases in the Ofgem Price Cap cannot be ruled out, FXStreet reported.

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