UK CPI numbers due on Wednesday 18th October:

17 Oct

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by consumers for a basket of goods and services. The basket of goods and services used to calculate the CPI is designed to be representative of the consumption patterns of the population. It typically includes items such as food, clothing, housing, transportation, medical care, and recreation. The prices of these items are collected periodically, usually on a monthly basis, and are used to calculate the CPI.

The CPI MoM and YoY figures are used to measure the overall change in the price level of the basket of goods and services. It is a broad measure of inflation that captures changes in the prices of all goods and services consumed by households. It is considered as the most widely used measure of inflation, as it gives a general idea of the overall trend of the price level.

Expectations are for headline YoY CPI in September to fall to 6.5% from 6.7%. The prior report acted as a decisive factor in the MPC’s decision to stand put on rates in September after the release saw declines in headline, core and services CPI, with the latter coming in at 6.8% and well below-the BoE forecast of 7.2%.

Analysts at Investec are of the view that “despite the push higher in fuel prices over the month, we still expect that inflation continued its downward trend in September”. They add that upside pressures could come from education and transport, however, it expects that “these were outweighed by easing price pressures in other areas, such as cooling food price inflation as well as clothing prices”.

From a policy perspective, like the labour market report, it is hard to see the data having much bearing on pricing for the November meeting which points towards the BoE standing put on rates once again. That said, if the release is particularly out of line, it could have some impact on expectations for rate cuts in 2024, however, given the difficulties in near-term forecasting throughout the current hiking cycle, it is unlikely that market participants will have too much conviction in cementing calls for next year.