UK CPI inflation going nowhere, some economists say

In a research note sent to clients, Bank of America's UK economist, Robert Wood, told clients that the UK consumer price index was likely to exceed the Bank of England's target of 2.0% from October 2021 to March 2022.

Nevertheless, the cost push inflation from commodities and the upwards effect of negative base effects "do not add up to a lasting inflation story", he said.

Wood had penciled-in UK CPI in 2021 of 1.6%, rising to 1.8% over 2022.

At the Retail Price Index level the outlook was for stronger price increases, of 2.6% and 2.5%, respectively.

The economist also emphasised that sharp swings in CPI readings versus economists' forecasts may lie ahead, as lockdown measures are lifted and consumption patterns reverse back towards what they were pre-pandemic.

But those swings in prices between categories of goods and services as Britons readjust their habits might not coincide, leaving observers hard-pressed to try and deduce the true underlying trend, he explained.

Core CPI meanwhile was seen at 1.3% in 2022, much the same as where it was at in 2015 and 2016.

As an aside, Samuel Tombs, Pantheon Macroeconomics's chief UK economist, was anticipating even less.

Overnight, Tombs wrote to clients to say: "Accordingly, we continue to think that domestically-generated inflation will remain subdued and that the headline rate of inflation will exceed the 2% target only fleetingly, around the turn of the year; see page three for our latest forecast.

"The MPC, therefore, will be content to complete its QE programme as planned and should refrain from adopting hawkish rhetoric later this year."