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Economy in Brief

UK Core Inflation Trends Turn Sharply Lower 
by Robert Brusca October 16, 2007

The chart on the left shows why there is talk of a BOE rate cut on the horizon. Not only are UK house prices losing their upward momentum, but inflation in the core HICP (excluding unprocessed food and energy) is showing sequentially lower rates of inflation.

Over the most recent three months, the headline HICP rate is actually negative. Over six months the rate of change in the HICP is only 0.6%. The BOE does not have an inflation range targeted but its main or headline gauge at 1.8% Yr/Yr is below its 2% mark. The core inflation rates are even lower and pointing to deceleration, sending a clear signal of inflation under control and possibly falling too rapidly.

UK HICP and RPI Inflation
  % MO/MO % saar
  Sep-07 Aug-07 Jul-07 3-MO 6-MO 12-MO Yr Ago
HICP 0.1% 0.1% -0.3% -0.4% 0.6% 1.7% 2.4%
               
All Item RPI 0.2% 0.6% -0.3% 1.8% 3.0% 4.0% 3.6%
RPIx 0.2% 0.3% -0.3% 0.8% 1.9% 2.8% 3.2%
RPI excl Seasonally Adjusted Food 0.2% 0.5% -0.2% 1.9% 2.9% 3.9% 3.6%
Food & Beverages 1.2% 0.6% -0.9% 4.0% 5.0% 4.2% 3.4%
Housing and HH expenditures 0.4% 1.1% -0.5% 4.1% 3.7% 6.5% 6.9%
Clothing & Footwear -0.3% -0.8% 0.1% -4.2% -0.2% -1.0% -0.7%
Leisure Services 0.4% 0.6% -0.1% 3.8% 2.4% 3.4% 2.5%
Leisure Goods -0.3% 0.3% -0.1% -0.4% -3.9% -3.2% -1.5%
Motoring expenditures -0.3% -0.1% -0.4% -3.1% 3.1% 1.1% -0.6%
Fares and travel costs -3.6% 1.6% 0.0% -8.0% 2.9% 6.0% 0.2%
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