UK inflation background (for tomorrow)
A renewed rout in global oil prices sent UK inflation back [to zero] [into negative territory] last month according to data released by the Office for National Statistics.
The consumer price index fell to [zero] [-0.1 per cent] in the year to August, from 0.1 per cent a month earlier, [in line with] [also missing] economists expectations.
Core inflation, which strips out more volatile sectors, [XX], after hitting a five-month high of 1.2 per cent in July.
Inflation first fell to zero in February and has been hovering around there ever since.
The Bank of England has it's being driven down by temporary factors, such as falling commodities prices and the strong sterling, which should start wearing off towards the end of this year. But rate-setter Kirsten Forbes recently said new research suggests the effect of a strong pound has been overstated, meaning inflation will overshoot expectations.
The August inflation report showed BoE officials expect inflation to pick up a little more slowly due to a renewed slump in global oil prices. Brent, the global benchmark, fell as low as $43 per barrel last month, from over $100 a barrel in June 2014. Inflation is likely to start rising towards the end of this year when the fall in oil prices drops out of the year-on-year comparisons.
Governor Mark Carney told reporters that it "wouldn’t be surprising if we had a month or two of negative inflation”.
Some BoE policymakers have suggested an interest rate rise is drawing closer amid risks of inflation overshooting its target in the short-to-medium term. Martin Weale wrote in the Scotsman that the main rate needs to rise "relatively soon" because inflation risks rising above the two per cent target in two to three years' time.