“MPC hawks will be perplexed as the annualised print for CPI in June recorded at flat, 0.1 per cent below last month, said Alex Lydall, senior trader at Foenix Partners. “While energy prices still weigh on inflation readings, rhetoric from Mark Carney in recent months suggested that the Bank of England was expecting a substantial uplift but this has not materialised. Deflationary pressures are not necessarily on the horizon, however, a change in voting members with a bullish stance on interest rate expectations, such as Martin Weale and Ian McCafferty, is likely to be delayed.
Rain Newton-Smith, the CBI director of economics said that while inflation remains elusive and is likely to persist in the coming quarter, it should rise relatively swiftly from the end of 2015, as the effect of past falls in oil prices fades.
“Inflation of below 1% over the rest of this year should give the MPC enough breathing space to leave interest rates unchanged at least until early 2016,” he added.
