UK DATA: June CPI -0.4% m/m; +2.4% y/y vs May 2.8% y/y; Below Median
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Consumer prices fell 0.4% m/m in June and were up 2.4% y/y, down
from 2.8% in May. This was the largest monthly decline between May and
Jun on record and the lowest annual inflation rate since Nov2009. It was
also way below the median forecast which was for a 0.1% monthly drop and
rise of 2.8% on the year. This is the third month in a row that the CPI
has come in below expectations, a reversal of the situation seen in the
past few years. Moreover, for the second quarter inflation fell to just
2.7%, significantly below the May Inflation Report forecast of 3.19%.
While part of the decline may be due to timing effects of the summer
sales (clothing and footwear was down 4.2% m/m with sales brought
forward), the latest drop should help to assuage fears that inflation
could be sticky coming down.