Deutsche Bank raised its 2027 U.K. inflation forecast, citing rising energy prices, firming food costs and indirect pass-through effects. Chief U.K. Economist Sanjay Raja now expects CPI to average 3.7% next year. Energy is the biggest driver of his September call.
Deutsche Bank now expects 2027 U.K. CPI to average 3.7%, up from 3.2% this year and above its previous forecast of 3.5%. Chief U.K. Economist Sanjay Raja also projects headline RPI rising to 5.2% next year, from 3.7% currently and a prior forecast of 4.8%.
The bank cites rising energy prices, firming food costs and indirect pass-through effects that it expects to build over coming quarters. According to Investing.com, Raja wrote: "Energy prices remain on an ascent," and lower harvests are already showing up in food price data.
September CPI seen at 3.49%
For September, Raja expects headline CPI to jump to 3.49% year-over-year, its highest rate all year, up from 3.1% in August. Core CPI is seen rising to 2.74%, services CPI to 3.71%, and headline RPI to 3.93%.
Energy is the biggest driver. Raja forecasts pump prices to rise 5.35% month-over-month, largely on diesel, which would leave blended pump prices up nearly 30% on the year. Altogether, he sees the energy basket's annual rate rising to 17.80%, from 13.83% in August.
Food turns higher, services edge down
Food prices are also turning a corner after hitting their lowest rate in 58 months. Deutsche Bank's models point to the food, alcohol and tobacco basket's annual rate rising to 1.96% from 1.62%, driven by meat prices.
Raja projects services prices to edge down slightly on a monthly basis, with a near 21% month-over-month drop in airfares. Even so, base effects push the annual services rate to 3.71%, from 3.45% in August.
Core goods prices remain comparatively subdued, tracking just under 1% year-over-year for most of the year. However, Raja flagged early signs of memory-chip shortages pushing IT goods prices higher starting in September, ahead of expected further increases in the fourth quarter.
Source: Investing.com
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