CPI inflation rose from 2.6% in June to 2.9% in July (consensus forecast 2.9%, BoE & CE 2.8%) and the lagged effect from high energy prices will probably lift it to around 3.5% later this year. But as long as the latest rebound in energy prices doesn’t go much further, we still think the weak labour market will prevent second-round effects, meaning inflation falls to 2.0% next year.
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