Commenting on today’s Consumer Price Index Inflation figures, Melanie Baker, economist, Royal London Asset Management, said:
“Both the labour market data yesterday and inflation data today suggest further rate rises are likely from the Bank of England once we are through the worst of the Brexit uncertainty (assuming that there actually is a deal). In the meantime, there was some good news for consumers with pay growth still on a rising path, but stable inflation.
“Headline CPI inflation was a tenth weaker than expected in October at 2.4%, year on year. Core CPI inflation, as expected was stable at 1.9%, year on year though. The details are a bit of a mixed bag, but breaking the data down by import intensity gives you a bit more feel for what is going on under the surface. There is an ongoing drag on inflation from the most import-intensive (ex-energy) bits of inflation. Helping to offset that is a rise in inflation in the least import intensive bits of inflation. That may reflect rising domestic underlying inflationary pressure. My measures of core services inflation ticked up a bit, but still aren’t showing a clear upward trend. However, with pay growth having risen, I still expect these to pick-up.
“More signs of rising domestic inflationary pressure, alongside continued signs of a tight labour market suggest the Bank of England will raise rates again once we are through this batch of Brexit uncertainty (assuming we actually get an approved and ratified withdrawal deal). For now, we still expect a rate rise in May 2019.”
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About Royal London Asset Management (RLAM):
Established in 1988, Royal London Asset Management (RLAM) is one of the UK's leading fund management companies, providing investment management solutions to both wholesale and institutional clients such as not-for-profit organisations, local authorities and the insurance sector.
RLAM manages £117 billion of assets and employs 89 investment professionals. It invests in all major asset classes including UK and overseas equities, government bonds, investment grade and high yield corporate bonds, property and cash.
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Issued September 2018 by Royal London Asset Management Limited, registered in England and Wales number 2244297; authorised and regulated by the Financial Conduct Authority. Registered Office: 55 Gracechurch Street, London, EC3V 0RL.