Capital Investors: UK Inflation Data Largely Not Reflecting Second-Round Effects

Ruth Gregory of Capital Economics said in a report that the rise in UK inflation is almost entirely due to an increase in fuel prices, and the fact that it is not clear whether the surge in energy prices will lead to a second round of inflation means that the data provides little information. In March, inflation rose from 3.0% in February to 3.3%. She said, "Given the weakness in the labor market, we still believe that the most likely outcome is to remain on hold for the long term, rather than a series of rate hikes." Gregory said that inflation in April might fall to 2.9% as the increase in regulated prices will be excluded from the year-on-year comparison, but inflation will rise again in July when the price cap on utilities regulated by Ofgem is updated. She said that inflation is expected to rise to around 4.0% in November.