{"id":85149,"date":"2023-11-16T02:54:38","date_gmt":"2023-11-16T07:54:38","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/good-news-for-boe-as-services-inflation-falls-further-than-expected\/"},"modified":"2023-11-16T02:54:40","modified_gmt":"2023-11-16T07:54:40","slug":"good-news-for-boe-as-services-inflation-falls-further-than-expected","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=85149","title":{"rendered":"Good News For BoE As Services Inflation Falls Further Than Expected"},"content":{"rendered":"<div data-test-id=\"content-container\">\n<p><figure class=\"getty-figure\" data-type=\"getty-image\"><picture>  <\/picture><figcaption> <\/figcaption><\/figure>\n<\/p>\n<p><em>By James Smith, Developed Markets Economist<\/em><\/p>\n<p>To no great surprise, UK inflation plunged in October as the impact of lower gas prices finally showed through in a meaningful way. Last year\u2019s 25% increase in household energy bills has dropped out of<span class=\"paywall-full-content invisible\"> the annual comparison, while electricity\/gas prices fell by 7% in October this year. And though a much less important factor in this latest drop, food price inflation has slowed dramatically too. Producer prices suggest the level of consumer prices at the checkout could actually start falling over the next few months. The net result is that headline CPI now stands at 4.6%, down from 6.7% in September. It\u2019s unlikely to change much again before year-end.<\/span><\/p>\n<p class=\"paywall-full-content invisible\">Inevitably, this will raise a few smiles in Downing Street, and much of the focus of Wednesday\u2019s data will be on the fact that<span class=\"paywall-full-content no-summary-bullets invisible\"> Prime Minister Rishi Sunak has met his goal of \u2018halving inflation\u2019. But the Bank of England has to be pretty pleased too.<\/span><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">That\u2019s because services inflation, the key metric for policymakers, came in much lower than the Bank had anticipated. Services CPI now stands at 6.6% on a year-on-year basis, below the BoE\u2019s 6.9% forecast. That\u2019s lower than we\u2019d expected too, and this is partly because we\u2019d been expecting another large increase in rents in October. The ONS reportedly updates social rents once per quarter and in April and July, we saw unprecedented increases in the overall rent category because of this, helping to push up services inflation. That ultimately didn\u2019t happen last month, and while it\u2019s a fairly niche quirk that would not likely have meant anything for monetary policy, it might help explain some of the difference with the BoE\u2019s forecast.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure paywall-full-content invisible\" contenteditable=\"false\"><picture> <span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/11\/50624080-170011695697132.png\" alt=\"UK services inflation and ING forecasts\" contenteditable=\"false\" loading=\"lazy\"><\/span> <\/picture><figcaption>\n<p class=\"item-caption\"><span>Macrobond, ING calculations<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Even so, we can be pretty confident now that services inflation has indeed peaked and is trending downwards. Surveys show that fewer firms are raising prices now, and for the service sector we think that can be partly explained by lower gas prices. Higher energy costs late last year were reported by firms to be a key driver of higher consumer prices, and we expect the same to be true in reverse now that gas prices are down. Further progress on services inflation may be limited in the short term \u2013 we expect it to end the year just above 6% &#8211; but we expect it to come down more readily from the spring and reach the 3.5-4% area next summer. Together with lower wage growth by that point, we think this will be a key catalyst for rate cuts to begin from August.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Wednesday\u2019s figures also all but rule out a resumption of rate hikes in December, though the chances were already low. This was the only CPI release before the next meeting, and we\u2019ll only get one more wage release before then. The next move in rates is therefore likely to be down.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong>Content Disclaimer<\/strong><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">This publication has been prepared by ING solely for information purposes irrespective of a particular user&#8217;s means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><em>Original Post<\/em><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong>Editor&#8217;s Note:<\/strong> The summary bullets for this article were chosen by Seeking Alpha editors.<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/seekingalpha.com\/article\/4652264-good-news-bank-of-england-services-inflation-falls-further-than-expected?source=feed_all_articles\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>By James Smith, Developed Markets Economist To no great surprise, UK inflation plunged in October as the impact of lower gas prices finally showed through in a meaningful way. Last year\u2019s 25% increase in household energy bills has dropped out of the annual comparison, while electricity\/gas prices fell by 7% in October this year. And [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":85150,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-85149","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Good News For BoE As Services Inflation Falls Further Than Expected | iFintechWorld<\/title>\n<meta name=\"description\" content=\"By James Smith, Developed Markets Economist To no great surprise, UK inflation plunged in October as the impact of lower gas prices finally showed through\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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