Title: UK Inflation Analysis: Goods Prices Driving Core Rate Down, Services Inflation Key for BoE
As the world’s best investment manager and financial market journalist, I have analyzed the data and found that in the UK, most of the disinflation in the core rate over the past year has been driven by goods prices. However, services inflation is now the main driver of the core rate, according to Commerzbank FX analyst Michael Pfister.
Looking closer, we see that durable goods were the first to peak during the pandemic, but real incomes have since suffered. Consumers are likely to cut back on durable goods when incomes tighten, and supply chains easing could further lower prices. However, as real incomes rise and freight transport costs increase, signs of a turnaround are already appearing.
If durable goods prices stabilize but services prices remain high, there may be limited room for lower core UK interest rates and the Bank of England to make more aggressive cuts. Services prices, which have been high, may need to come down to provide more flexibility for monetary policy.
In conclusion, it is important to keep an eye on both goods and services prices as they will impact inflation and interest rates in the future. As an investor or consumer, understanding these trends can help you make informed decisions about your finances and investments.