Investment Clock insights

CPI close to topping out


Ian Kernohan

15 August 2017

The Consumer Price Index (CPI) remained at 2.6% in July, still above target, but down from its recent peak.  The price of fuel was the largest downward contributor, offset by smaller upward contributions from a range of goods and services.  
While there is still some residual impact of sterling devaluation to feed through, with underlying inflationary pressures low, we think that CPI is close to topping out for the immediate future.  In their latest Inflation Report, the Bank of England forecast inflation to peak at 3% in the autumn, and will be happy to keep interest rates on hold as a result.

The Consumer Price Index (CPI) remained at 2.6% in July, still above target, but down from its recent peak. The price of fuel was the largest downward contributor, offset by smaller upward contributions from a range of goods and services.

While there is still some residual impact of sterling devaluation to feed through, with underlying inflationary pressures low, we think that CPI is close to topping out for the immediate future. In their latest Inflation Report, the Bank of England forecast inflation to peak at 3% in the autumn, and will be happy to keep interest rates on hold as a result.

The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.