UK inflation: Further upside in sight, says Deutsche Bank – Deutsche Bank

UK price pressures are expected to remain sticky, with Deutsche Bank economists Sanjay Raja and Maui Brennan forecasting a rise in October inflation led by energy, tobacco and modest increases in food and services prices. Their projections put headline CPI at 3.80% year-on-year, alongside increases in Core CPI and Services CPI. They also expect headline CPI to approach 4.25% early next year.

Why Does Deutsche Bank Expect Renewed Inflation Pressures?

"After broadly matching expectations in September, we expect UK inflation to rise further in October."

"What’s the story? The October inflation story will feature three main drivers. First, energy prices are set to push even higher as we enter the final quarter of the year, with the Ofgem Price Cap up, heating oil prices up, and petrol and diesel prices up too. Second, tobacco duty will also be a prominent feature of the October inflation report, with higher duties on vapes and tobacco kicking in."

"Where do we see inflation going in October? We expect headline CPI to have risen to 3.80% y-o-y (Sep-26: 3.48%). Core CPI, we think, will have jumped by 2.87% y-o-y (Sep-26: 2.78%). Services CPI, we project, will have edged up to 3.87% y-o-y (Sep-26: 3.72%)."

"Looking ahead, more inflation is coming. We continue to see headline CPI pushing closer to 4.25% y-o-y at the start of next year. Headline prices will also likely remain sticky, as food prices push higher, and core goods start to see some of the impacts of higher energy prices impact retail prices."

"Index-linked price rises will also keep services momentum from slipping too far."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)