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U.K. headline consumer price inflation eases slightly in November

The headline inflation of U.K. resumed its downward trend in November. The consumer price index dropped to 2.3 percent after the unchanged print of 2.4 percent in October. Today’s result is in line with consensus expectations. The core inflation, which excludes energy, food, alcohol and tobacco, also dropped a bit to 1.8 percent year-on-year from 1.9 percent. Meanwhile, the RPI inflation rate also eased slightly in November. The RPI inflation eased to 3.2 percent from 3.3 percent.

The downward movement was widespread, with several categories providing solid downward influences to the month-on-month change in prices. Markedly, the effect of the recent slide in oil prices signified that motor fuel prices dropped 1.1 percent last month, comparative to a 1.6 percent monthly rise last November.

In the meantime, prices of recreational and cultural items recorded a much more muted rise this November compared to last year. In this category, games and toys negatively impacted the rate, potentially a reflection of some retailers having started Black Friday promotions early.

While there is very little ‘new’ news in the latest report, it is worth underlining that the annual rate of goods price inflation eased to a 21-month low of 2.1 percent from 2.5 percent previously, noted Lloyds Bank in a research report. The continued decline in motor fuel prices in December, along with the effect of the energy price cap – which takes effect from January, there is a possibility that headline inflation might reach 2 percent in the first quarter of 2019, said Lloyds Bank. However, this is likely to be temporary.

Otherwise, it is the outlook for domestically generated inflation that would be a key determinant to the overall path that inflation takes over the quarters ahead. The latest report states that the rate of services price inflation remained stable at 2.5 percent, while the recent labor market report indicated a further acceleration in wage growth, stated Lloyds Bank.

“Assuming that the Bank of England’s view of a Brexit deal being struck holds, this would support our view that modest increases in Bank Rate are likely to be required over the forecast horizon”, added Lloyds Bank.

At 12:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at 34.7124, while the FxWirePro's Hourly Strength Index of US Dollar was slightly  bearish at -50.5344. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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