Deutsche Bank economist Sanjay Raja says UK inflation is running hotter than the Bank of England expected, with headline CPI at 3.1% year-on-year in August, its highest since December last year. Energy prices drove the increase, as pump prices rose 7% month-on-month and heating oil jumped 13%, while services momentum also worried, with private rents up 0.49% month-on-month, catering up 0.45% and health services up 0.4%. Raja notes headline CPI now sits 0.25 percentage points above the Bank's forecast and services CPI 20 basis points above, though food inflation held at 1.3% year-on-year, nearly 0.7 percentage points below projection. He expects the Ofgem price cap to rise by over 20% in January and food prices to climb on heatwaves, droughts and a potential El Niño event. Deutsche Bank projects CPI approaching 4% around the turn of the year, and Raja says the likelihood of rate hikes has strengthened as the Bank's job to keep inflation at 2% becomes harder.
Deutsche Bank AktiengesellschaftDeutsche Bank is cited only as the source of the inflation analysis, with no company-specific financial development.
