Analysts at TD Securities note that UK’s April inflation came in a tick lower than expected, with core inflation unchanged at 1.8% y/y, while headline inflation rose to 2.1% y/y.
“The increase in headline inflation came on the back of higher household energy prices, as the government-set price cap was raised on April 1st; this is likely to unwind in October when the cap is again reviewed (an assumption the BoE is making as well).”
“The usually Easter-sensitive Package Holidays component was very weak, leading to a sharp decline in Recreation inflation. This component (which also includes the volatile Video Games category) is largely responsible for the downside miss in core this month.”
“The BoE won't be too worried about today's figures in light of ongoing political uncertainty. On that front, Theresa May will take questions for up to 3 hours from MPs this afternoon.”