The growth in consumer prices in UK remained stable at 0.3% yoy in May. Inflationary pressures remained weak due to external and internal factors, such as the Bank of England (BoE) has for some time in which to wait and decide how to act, until pass the period of expected high volatility around the referendum. The core inflation, which excludes volatile prices of fuel and food, also remained at the same level as in April to 1.2%. Excluding March, when inflation jumped to 0.5%, the growth in consumer prices since the beginning of the year remains unchanged.
The oil and diesel prices in Britain reported small increases on an annual basis, while the largest downward pressure have lower prices of clothing, footwear and food products. These goods cheaper in May because of competition between large retail chains. The British Retail Consortium said in its latest survey that at this stage there is no prospect of raising prices. However, the executive director of the organization, Helen Dickinson, stated that recent increases in oil prices will put pressure on retailers to increase their prices.
A separate survey of the National Statistics Office showed that house prices in Britain have risen by 8.2% since the beginning of the year to April, while a month earlier growth was 8.5%.
The inflation data were published at a time of high volatility before the UK referendum on June 23. If people vote for leaving the European Union, inflation is expected to accelerate significantly faster, largely due to the depreciation of the GBP. Brexit can lead to higher consumer prices, but also to weaker growth and higher unemployment – asymmetrical situation in which the central bank will need to carefully balance.
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