Pound and oil prices weigh on UK inflation

The lower oil price and strong sterling weigh on the near-term UK inflation outlook. CPI inflation will stay at around 0% during the autumn but one cannot rule out that inflation could turn negative again during this period. 

The falls in energy and food prices should begin to drop out of CPI inflation around year end but the recent decline in oil prices, the announced energy bill price cuts by energy suppliers and the strong sterling imply that the pickup in inflation around the turn of the year will likely be smaller than the market previously thought. 

"CPI inflation is expected to pick up to 0.9% in January. CPI inflation to increase further during 2016 and eventually to reach 1.7% at the end of 2016. Also core inflation is subdued but we expect it to pick up in line with headline inflation. Core inflation is likely to reach 1.6% at the end of 2016", says Danske Bank.