UK CPI inflation likely accelerated in July

The stable upward movement in UK’s CPI inflation is likely to have continued in July. An upward distortion from air fares happened in July that usually takes place and is likely to be at least partly reversed in this month’s data.

Given that, the effect of recent depreciation in the sterling is expected to be seen in food price deflation that is likely to have eased to -2.7 percent from -2.9 percent year-on-year, said Societe Generale in a research report.

Meanwhile, prices of petrol rose in July, contributing to the headline inflation figure. In core prices, the reversal of the air fare impact is expected to result in easing of services inflation. However, this is likely to be countered by a minor reduction in goods price deflation resulting in core inflation to remain at 1.4 percent year-on-year.

“The overall result should be an increase in CPI inflation from 0.5 percent to 0.6 percent yoy with RPI inflation rising from 1.6 percent to 1.7 percent yoy,” added Societe Generale.