UK CPI Preview: Forecasts from four major banks, prices continue to accelerate in October

The United Kingdom will release the Consumer Price Index (CPI) data on Wednesday, November 16 at 07:00 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of four major banks regarding the upcoming UK inflation print.

Headline is expected at 10.7% vs. 10.1% in September while Core, which excludes volatile food and energy prices, is expected at 6.4% year-on-year vs. 6.5% in September.

Wells Fargo

“We look for another jump in electricity and gas prices, and see the October CPI rising 1.8% MoM and rising to 10.9% YoY. The latter would represent the fastest pace of CPI inflation for multiple decades. Broader price pressures will likely remain steady, however, and we anticipate the increase in the October core CPI will be similar to the 6.5% YoY gain seen in September. As the energy price cap becomes more binding, the BoE expects CPI inflation to remain through the rest of Q4, before easing from early 2023. The elevated rates of inflation will probably see the BoE raise its policy rate further at upcoming meetings. However, with the UK likely already in sharp recession, easing of inflation could be enough to curtail central bank rate hikes, and we see a peak in the UK policy rate of 3.75% by early 2023.”

TDS

“UK inflation likely rose significantly in Oct (11% YoY) due to a sharp increase in energy prices. While the ex-PM's £2500 energy price cap protected households from an 80% increase, household energy bills still rose by about 25% in Oct. Core inflation will be weighed down by base effects from last October's VAT hike, but we think firm services inflation will keep the YoY rate at 6.5%.”

SocGen

“Despite the Energy Price Guarantee (EPG) coming into effect in October, helping limit a potentially eye-watering 80% increase in utility prices, rising utility prices will almost certainly be the largest contributor to CPI inflation rising from 10.1% to 10.5% in October. Consequently, according to the CPI index, utility prices will increase by 27% and add around 0.7pp to CPI on a YoY rate. Outside of utility prices, a fall in fuel prices should shave 0.2pp off headline inflation, but this will be partially offset by an acceleration in food prices from 14.5% to 15.5%. However, there is always the risk that these volatile components surprise to the upside, as they have for the past few months. For core, we see price growth decelerating from 6.5% to 6.4%, driven by a marginally lower services inflation to 2.6% while goods inflation may remain stable at 2.3%.”

Citibank

“Inflation in the UK is also likely to increase with headline CPI jumping to 10.8% YoY. The Bank expects 10.9%. The main driver here is the move to a new Ofgem price cap, which alone is likely to add 60 bps to headline inflation. We believe RPI will print at 14.1% YoY. The marginal downside surprise versus the Bank’s forecast primarily reflects the impact of the tuition fee freeze in place over the coming years. Otherwise, we think underlying momentum remains robust. This will likely keep rates elevated through Q4, although Citi Research expect inflation to begin to fall back through 2023.”