After the government lifted the cap for energy tariffs, it was widely expected to see a jump in electricity and gas prices that would drive the UK consumer price inflation rate above the 2% target of the Bank of England (BOE). And thanks to a 10.9% jump in electricity prices and a 9.3% jump in gas prices, consumer prices rose 2.1% year-on-year. Overall, the jump was less than anticipated though, and consumer prices missed economists’ expectations. However, retail prices, where electricity and gas prices have a higher weight, overshot expectations, creating overall a balanced picture. We think that this increase in inflation in the UK is likely to be short-lived since energy prices should remain relatively stable in coming months, leading to a gradual decline of the inflation rate below 2.0% again.
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(Almost) Daily Market News Update
- Published:
23 May 2019 -
Author:
Joachim Klement -
Pages:
7
After the government lifted the cap for energy tariffs, it was widely expected to see a jump in electricity and gas prices that would drive the UK consumer price inflation rate above the 2% target of the Bank of England (BOE). And thanks to a 10.9% jump in electricity prices and a 9.3% jump in gas prices, consumer prices rose 2.1% year-on-year. Overall, the jump was less than anticipated though, and consumer prices missed economists’ expectations. However, retail prices, where electricity and gas prices have a higher weight, overshot expectations, creating overall a balanced picture. We think that this increase in inflation in the UK is likely to be short-lived since energy prices should remain relatively stable in coming months, leading to a gradual decline of the inflation rate below 2.0% again.