Analysts at TD Securities note that the UK CPI surprised to the upside with the headline rising from 2.5% y/y to 2.7% and core up from 1.9% to 2.1% y/y, both bucking the consensus for a slight deceleration.
Key Quotes
“The details showed a second month of unseasonably strong recreation prices, which instead of mild deflation that is usual in the summer months rose 0.6% m/m in both July and August.”
“Clothing prices also didn’t show any downside distortions from the warmer weather. It is unclear whether the recent strength in recreation will reverse in the coming months, but given the broader strength in the details, it seems likely we could continue to run a bit above the 2.5% y/y the BoE has forecast for CPI through September.”