The going is soft at Royal Ascot and inflation is still bogged down at low levels

Commenting on today’s UK inflation figure, Russ Mould, investment director at AJ Bell, says:

“The going will be soft on the opening day of Royal Ascot for the first time since 1971 and the Bank of England will not be getting the bunting out after today’s inflation report, as the unchanged headline reading of 0.3% leaves the UK unable to generate any form of gallop toward the official 2% inflation target.

This helps to explain why the market is still pricing in the first interest rate rise from the Monetary Policy Committee for some time in 2018, while Governor Mark Carney has stated he could even cut headline borrowing rates in the event a vote to leave the EU on 23 June has a marked impact on UK economic activity.

The Bank of England’s “core” measure also came in unchanged from April at 1.2%, (see chart below).

The temporary boost provided to the March figure by air fares reversed as transport costs fell. Other leading areas of falling prices were food and non-alcoholic beverages and clothing, as if to confirm conditions remain sticky for food and general retailers.

Restaurants and hotels remained a rare area of increased prices, though higher health and education costs are unlikely to be welcomed by many, especially as they eat in to consumers’ disposable income.”

Source: ONS

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