UK CPI inflation is expected to rebound to 0.0%

UK CPI inflation, due 16 June, is expected to have moved up to 0.0% in May after a brief dip into negative territory. Headline CPI moved into negative territory in April, to -0.1% y/y, for the first time in several decades. 

Core CPI inflation was also softer, at 0.8% y/y, a sign that the effect of lower oil prices is feeding into non-energy goods. 

Core CPI inflation is expected to accelerate to 0.9% y/y. Trade-weighted sterling is up 7.5% y/y, which will likely apply downward pressure on inflation near-term. 

"We expect headline CPI to pick up quickly once the lower oil price in late 2014 either fades out of the 12-month CPI calculation or oil prices move up significantly",says Standard Chartered.

The Bank of England is closely monitoring labour market developments for signs of domestic inflationary pressures, which for now are muted.