Today’s release of UK inflation data for September will likely differ very little from data from August, which showed an
Today’s release of UK inflation data for September will likely differ very little from data from August, which showed an anaemic year-on-year rise of 0.2%—far from the Bank of England’s target of 2%. Government stimulus, such as the “Eat Out to Help Out” restaurant subsidy scheme, has helped to keep consumer prices low as the economy struggles to mount a sustained recovery. Yet this recent trend is unlikely to continue in the short-term: last week, new lockdown restrictions were put in place to stem spiking COVID-19 cases throughout the country.
Larger threats loom over consumer prices and the UK economy as it becomes increasingly likely that Prime Minister Boris Johnson accepts a no-deal Brexit at year’s end. Johnson expects a future trade relationship with the EU to resemble that of the bloc’s relationship with Australia, which is largely based on WTO guidelines. Government officials and business leaders are expecting this scenario to produce border delays and increased tariffs that will subsequently drive up prices across the board. Expect relative price stability through the end of the year if trade negotiations continue, but stay abreast of firms’ preparations to mitigate a no-deal scenario.
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