UK CPI likely eased further in February

Standard Chartered notes its views on UK CPI as follows....

• We expect the CPI inflation rate, due on 24 March, to have eased further, to 0.2% y/y in February from 0.3% prior, and core CPI to have eased to 1.3% from 1.4%. 
  
  
• The wide divergence in headline and core CPI shows the impact of lower energy prices on headline inflation. Additional downward pressure comes from the exchange rate.
  
  
• The Bank of England's effective British pound (GBP) exchange rate shows that GBP appreciated 5% in the past year on a trade-weighted basis. 
  
  
• We expect headline CPI to drift slightly lower in the coming months before gradually moving higher towardsthe end of the year, and averaging -0.7% in 2015. 
  
  
• Productivity growth and wage growth are the key variables to monitor in terms of domestic inflationary pressures. Wage growth has been on pause in the past two months.