UK CPI proves BoE’s cautious approach entirely justified

15th September 2015 By: Ranko Berich

UK CPI – 15/09/15

The UK inflation report had few surprises for analysts, but the mounting downside risks to the economy certainly justify the Bank of England’s wait-and-see approach to rate hikes.

Headline inflation dropped back to zero while core inflation also fell. While this is little more than a statistical blip, due to clothing prices dropping out of reckoning, inflation itself was missing from this month’s report.

The downside risks to inflation are now mounting, with the latest falls in commodity prices adding more volatility to the global economy. The general consensus at the Bank is that energy prices will at least stabilise, so if crude oil prices take another hit the UK economy could be in for a bumpy ride. With this report showing no sign of labour market gains filtering through to higher consumer prices, the Bank of England’s extreme caution around rates now seems entirely justified.”