UK CPI Preview: Forecasts from four major banks, promising developments

We forecast headline and services inflation to remain unchanged between August and September (at 6.7% and 6.8% respectively) but see a small fall in core inflation from 6.2% to 6.1%.  0.2pp. Looking further ahead, we expect headline inflation to fall to just under 4.5% by the end of this year, just over 2.5% at the end of next and a little below the 2% target at the end of 2025. As for core, we have 5.8%, 3.0% and 1.9% for the end of 2023, 2024 and 2025 respectively.

We look for September inflation data to echo the August data, with the headline rate remaining at 6.7% YoY and core edging down to 6.1% YoY. Focus for the MPC will continue to be on the services number, and here we see the YoY rate remaining 20 bps below the MPC's forecast (TDS: 6.8% YoY, BoE: 7.0%). Overall, further signs of improvements in inflation, and most importantly, a lack of a rebound after August's significant downside miss, would continue to suggest that the MPC will keep Bank Rate on hold at its November meeting.

We expect September CPI to inch lower to 6.61% YoY and see the core gauge declining to 6.0%.

We think the disinflationary trend should continue in September with headline inflation falling 0.2pp to 6.5% and core by 0.2pp to 6.0%.