2025-12-17 06:35:00
Morgan Stanley estimates that UK headline annual CPI will come in at 3.4% in November, with the core annual reading being at 3.3%. That’s slightly under the consensus estimate from analysts of 3.5% for the former and 3.4% for the latter. But with both numbers set to keep above 3%, the firm notes that it reflects ongoing stickiness in UK prices despite easing pressures elsewhere.
Their more detailed breakdown estimates core goods inflation at 1.2% while services inflation is to remain high at 4.5%. As such, it will continue to pose a challenge for the BOE in wanting to convince of a more decisive disinflation narrative in the UK.
Overall, they see the risks to price pressures as being balanced. There is potential for downside risk to come from food prices but aggressive Black Friday discounts and sales could lead to upside pressures on core goods inflation. Meanwhile, Morgan Stanley expects services inflation to continue to reflect more evenly distributed risks towards the overall inflation picture.
As a reminder, the BOE will meet for one final time tomorrow. And market players are well expecting another 25 bps rate cut even with potentially stickier price pressures today. Going into the report later, traders are pricing in ~92% odds of a rate cut for this week with the next rate cut only fully priced in for July next year.
