Copy article

Headline and core inflation drop unexpectedly in August

ended 20. September 2023

The highly anticipated inflation data has just dropped and headline CPI is 6.7% (down slightly from 6.8% in July as opposed to the expected increase) and the closely monitored core inflation figure also fell to 6.2% down from 6.9% in July. Full report >> here <<. What does this mean for savers and investors, and which asset class could benefit from this? Deadline is fairly tight as this story is BREAKING.

3 responses from the Newspage community

Copy all

Copy

Editor
Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
This data is great news for homeowners, but less so for savers as rates might have peaked. Inflation was expected to increase this month, but both headline and core rates have reversed giving the Bank of England the reason to keep rates on hold as opposed to hike them again, as was expected. Although energy costs were higher, food and accommodation services pushed the overall basket down. This is exactly what Andrew Bailey and Sunak must have been wanting, as neither man could have enjoyed the pain they were inflicting on households. Savers would be wise to lock in rates now, as would those looking to purchase an annuity for retirement. Sterling has already plummeted by nearly 0.5% against the dollar and gilt rates have dropped. This is the pivot the market has been expecting, it’s just come a month early.
Copy

Premium
John Choong
Senior Equity Research Analyst at Investing Reviews
On the back of yesterday's upwardly revised inflation outlook for the year, today's cooler-than-expected CPI print will come as a relief. More encouragingly, core CPI — which the MPC sees as more crucial in the medium term — dropped more than expected. As such, this invokes the possibility that the Bank of England's rate-hiking streak could end as soon as tomorrow.

Nonetheless, there's still a long way to go before inflation returns to the BoE's 2% target. With oil prices shooting up in recent weeks, all eyes will be on next month's CPI data to assess whether August's fall was a stroke of luck.

Either way, the rate outlook will hang in the balance of where oil prices go in the coming months. Further moves upward could reverse progress as oil tends to be a leading indicator. This could stoke further rate hikes and erase any prospects of a soft landing. But for now, housebuilders and bank stocks are likely to jump as gilt yields are expected to plunge at the open.
Copy

Gary Bush
Financial Adviser at MortgageShop.com
After a lot of nail-biting before this release of the inflation figure - some GOOD NEWS that surely will allow the Bank of England to pause its base rate increase activity - helping UK mortgage holders. For savers, by our reckoning, a lot are still due a nudge upwards from their savings providers so it's technically not bad news, and after the sudden rush of the base rate increases in the last 18 months+ I am not sure if any savers will be complaining at a BOE pause.