Commodities continue to play a role in global inflation trends

Global commodity price influences are also continuing to play a role in UK inflation trends, which in September relapsed to a -0.1% annual rate, entering shallow deflation for the second time since April. 

Inflation is likely to remain negative until energy-related base effects impart an upward push from November. Furthermore, the relative stability of UK 'core' inflation also provides some reassurance on the likelihood of an uptrend. 

'Core' inflation held at 1.0% in September, and even for some import-intensive categories the pass-through of the past strength of the sterling exchange rate appears limited so far. 

Meanwhile, signs of domestic cost pressures are becoming more evident, as the tightening of the UK labour market appears to have resumed in the latest data. 

Annual growth of average earnings picked up a little further in the 3 months to August, to 3.0%. Moreover, revisions to trends onunderlying unit labour costs, taking account of trends in productivity growth, took the rate of increase to 2.2% y/y in 2015 Q2, close to their long-run average. 

"As such, the continued gradual firming of 'core' inflation. alongside the waning influences from falling energy and food prices, should return inflation towards the 2% target over the next three years", says Lloyds bank.