Payden & Rygel: UK Services Inflation Rates
This week, the U.K. Consumer Price Index (CPI) report showed that the headline CPI increased 0.6% over October, led by a significant jump in energy prices, pushing the year-over-year CPI rate from 1.7% to 2.3%.
However, as the Bank of England Deputy Governor Ramson said in a speech this week, 'Recent past may not be a good guide to the future outlook for the persistence of domestic wages and price setting.'
Indeed, core CPI, which excludes volatile food and energy components, already slowed to 3.5% year-over-year in October compared to 5.1% at the start of the year. Further, the three-month average annualized monthly rate in service prices, the stickiest component of inflation, moderated to 2.3% as of October, the slowest since 2021.
Even alternative measures of services inflation that exclude volatile components have shown signs of easing. Given still elevated core inflation levels, the Bank of England may not be able to cut rates at the pace of global peers, such as the euro area and Canada, but the trend in inflation and softer growth should support additional easing in policy rates in the next six to 12 months.
