UK: A non-inflationary boom? – ING

By FXStreet FXStreet (Delhi) – James Knightley, Senior Economist at ING, suggests that a booming jobs market and surging retail sales mean that the period of low inflation is unlikely to last.

Key Quotes

“This week’s UK data has provided some really interesting stories. The economy is creating jobs in phenomenal numbers and the number of job vacancies is not far off matching the number of people claiming out of work benefits. This is clearly good news for consumer confidence, which has translated into remarkably strong retail sales growth. Yet, at the same time, inflation is non-existent and wage growth is actually slowing. Of course, the drop in the oil price and the supermarket price war have been clear factors why headline inflation is so low at just 0.1%, but even the core rate is pretty modest at 1.2%YoY.”

“This low level of inflation partly explains why wage growth has slowed with the Bank of England stating in last week’s policy decision minutes that it could be that “lower headline readings of inflation have acted to limit recent nominal pay growth, despite the tightening labour market.” Given this general lack of inflation pressures we are likely to see the Bank of England continuing to …read more

Source:: FX Street