TD Securities forecasts UK inflation to climb in July due to Ofgem’s energy price adjustment, with core CPI steady at 2.6%.
UK headline inflation is expected to rise to 2.9% year-on-year in July, driven by the Ofgem energy price cap adjustment. The increase aligns with market expectations but exceeds the Bank of England’s 2.8% forecast, while the prior print stood at 2.6%.
Services inflation is projected to ease to 3.4%, down from 3.6% in June, but core goods inflation is set to tick up to 1.0%, offsetting the decline. Core CPI is forecast to remain unchanged at 2.6%, slightly above market expectations of 2.5%.
Upside risks persist, including potential food price increases due to higher fertilizer costs and adverse weather, as well as rising airfares and core goods inflation. These factors could challenge the recent disinflation trend and complicate the BoE’s policy outlook.