UK CPI inflation likely turned negative in April

UK April CPI inflation likely was -0.1% y/y after 0.0% prior, and core CPI may have eased to 0.9% y/y from 1.0%. Trade-weighted sterling (GBP) is up 7.5% y/y, which will likely add downward pressure on inflation near-term. 

Headline CPI inflation is expected to pick up quickly after the lower oil price in late 2014 either fades out of the 12-month CPI calculation or until the oil price moves up significantly. 

Some indirect effects (e.g., goods and services benefiting from cheaper oil), and deflationary pressures from the euro area are likely dragging core CPI inflation down. 

The Bank of England is closely monitoring developments in the labour market for signs of domestic inflationary pressures, which so far remain limited.