UK CPI inflation to remain at precisely zero

The outlook for UK inflation remains muted. Energy prices have fallen again and the continuing appreciation of the pound is restraining the prices of imported goods. The latter is a powerful but ultimately temporary effect on inflation. Set against those factors, the labour market is tightening ,which should in due course push up services inflation. 

Moreover, there are some signs that food price deflation has bottomed out. However, for the July data, only a modest easing is expected of this last factor. Core inflation should be steady at 0.8% yoy and petrol price deflation should be roughly stable. The overall result should be that CPI inflation stays at precisely 0.0% yoy but RPI inflation should rise modestly from 1.0% yoy to 1.1% yoy.