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전망·동향
Rate Cut Tomorrow Unlikely
NIESR
2024.09.19
Today’s ONS numbers indicate that annual inflation remains unchanged at 2.2 per cent in August.
Services inflation has gone up to 5.6 per cent in August and remains the main contributor to headline inflation. This serves as an upward pressure on core inflation, which has gone up to 3.6 per cent in August, after an encouraging fall to 3.3 per cent in July.
While energy continued to have a large negative contribution on inflation in recent months, the upcoming 10 per cent increase in the energy price cap in October will exert a sizeable inflationary pressure (with a preliminary estimate of a 0.5 percentage point rise in the headline rate).
Our underlying inflation measure (which excludes 5 per cent of the highest and lowest price changes to eliminate volatility) continued to fall to 1.4 per cent, remaining around the lowest levels in nearly three years. This is a positive development which indicates that the headline rate is being driven by large price increases in a few sectors, with inflation rates broadly falling for most items.
We expect inflation to rise towards the end of the year due to base effects, before stabilising in early 2025. In addition, given that underlying inflation remains elevated, this greatly decreases the likelihood of a rate cut tomorrow and in November, and new developments will be closely monitored by the MPC.
Moving forward, it would be important to keep an eye on month-on-month inflation figures (‘new’ inflation) to determine to what extent we inflation will rebound in the coming months.