UK DATA: May CPI -0.1% m/m; +2.8% y/y vs Apr 3.0% y/y; Below Median
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CPI inflation continued to fall in May, hitting its lowest level
for more than two years, pushed down by food and petrol prices. These
figures are the 2nd consecutive month where CPI has come in under
expectations and strongly suggest that Q2 inflation will undershoot the
BOE’s latest forecast. This is just another factor that will help to
persuade the Monetary Policy Committee to vote for further Quantitative
Easing at the July meeting. Consumer prices fell 0.1% on the month in
May and was were up 2.8% on the year, down from 3% in April. This was
the first ever recorded fall in the index between April and May and the
lowest rate of inflation since November 2009. Analysts had forecast a
0.3% monthly rise in the CPI and no change in the annual rate of 3%. As
expected, petrol prices had a significant downward impact with petrol
prices falling by 4.5 pence per litre during the month.