Tomorrow morning ONS will release the figure for CPI annual inflation in September. CPI inflation is widely expected to come in at over 5%, as energy price rises start to hit consumers.
As our forecasts show, this should be the peak for inflation, and recent comments from the Governor of the Bank of England suggest that inflation is now likely to fall below its 2.0% target in the medium term.
CPI inflation likely to edge over 5% in September, before falling backForecasts for annual % change in consumer price index
In interviews following the bank's latest interest rate decision, the Governor said he believed that the rate of inflation should fall back as temporary factors such of the VAT rise fall out of the measure, and weaknesses in the UK and global economy continue to weigh on demand.
There are still upside risks to inflation, though, particularly if increased inflation expectations begin to feed through to pay settlements, but the minutes from September's MPC meeting suggest that this is less of a concern while the economy remains weak.
What to watch:
- There will be more information on the MPC's latest thinking on Wednesday, when the minutes from the October meeting are released.
- We will also be releasing our Pay Settlements survey this week, which will give an indication as to whether industry is being affected by higher wage expectations (see last month's press release).