UK inflation to be above 1% next year

UK GDP data for Q2 is scheduled to release today. The eoconomy is expected to post better growth rate in Q2, but it disappointed in Q1 with 0.3% q/q growth. Barclays estimates the economy likely to post 0.5-0.6% q/q for the rest of the year. Intensification of fiscal austerity and EU referendum are expected to weigh on sentiment (higher saving rate, lower investment).

As negative base effects from oil prices fall out the % y/y measure, inflation is expected to return to above 1% at the beginning of next year, and from there to be pushed up gradually as domestic inflationary pressures build up. The bank estimates the inflation rate to hover just above zero this year and likely to be around 1.6% next year.