Maybe I am reading too much into it but I detected a bucketful of caution in Ken Murphy’s careful choice of words on inflation today.
“Encouraging” is good, obviously, but “early signs” and “starting to ease” do not smack of a huge breakthrough in the battle with the inflation monster.
Clearly there has been some progress in categories such as dairy but there are still major structural supply issues keeping other prices elevated.
Shoppers who expect that their trolleys of groceries will actually cost them less any time soon are in for a disappointment. All eyes now turn to the Office for National Statistics numbercrunchers on Wednesday for the May inflation data.
The headline figure should fall again down towards 8% — further slow progress on the long road back towards monetary rectitude.
A “miss on the upside” — as the City scribblers like to call it — would obviously be bad news and could trigger another round of gilts market turmoil.
But while next week’s number is important, the one to watch for is the July figure that will be unfurled in the dog days of August when most of the Square Mile’s drones will be sunning themselves in Cornwall or on the Med.
That is the month when the energy cap falls significantly below the Government’s £2500 price guarantee.
That should, in theory, feed through to a significant fall in the Consumer Prices Index to perhaps close to 7%. If that number is disappointing we could be in for another very bumpy ride in the autumn.
Just like last year.
