UK Inflation Eases More-Than-Expected On Food Prices

UK inflation slowed more-than-expected in September on falling food prices, giving space for the Bank of England to wait-and-watch for the outcome of Brexit negotiations.

Consumer price inflation eased to 2.4 percent from 2.7 percent in August, figures from the Office for National Statistics showed Wednesday.

The rate was also below the expected 2.6 percent. Despite a bigger-than-expected fall, inflation still remains above the central bank’s 2 percent target.

Core inflation that excludes energy, food, alcoholic beverages and tobacco, slowed to 1.9 percent from 2.1 percent in August.

“Food was the main downward pull on inflation as last year’s September price rises failed to reappear, while ferry prices dropped after their surprisingly high summer peak,” ONS Head of Inflation Mike Hardie said.

“However, it wasn’t all one-way traffic with energy suppliers pushing up their prices,” Hardie, added.

Month-on-month, overall consumer prices climbed 0.3 percent compared to the forecast of 0.5 percent.

Another report from ONS showed that output price inflation has remained positive since July 2016. Output prices advanced 3.1 percent after gaining 2.9 percent. Economists had forecast prices to climb again by 2.9 percent.

On a monthly basis, output price growth doubled to 0.4 percent from 0.2 percent.

At the same time, input price inflation accelerated to 10.3 percent from 9.4 percent in August. On the month, input prices gained 1.3 percent, slightly faster than the 1.2 percent rise in August.

The larger-than-expected fall in CPI inflation in September takes the pressure off the Monetary Policy Committee to act before it knows the outcome of the Brexit negotiations, Andrew Wishart, an economist at Capital Economics, said.

In contrast to the fall in CPI inflation, producer price inflation rose, suggesting that inflation will struggle to fall back much further before the end of the year, the economist added.

Data released on Tuesday revealed that the unemployment rate remained at the lowest level in 43 years in the three months to August, helping the average earnings to increase the most since late 2008.

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