U.K. Energy Inflation Pickup Could Raise Inflation Forecasts
Dow Jones
Yesterday
1505 GMT - The re-acceleration of energy inflation in the U.K. begs the question whether there should be larger indirect and second-round effects in inflation forecasts, say Barclays economists Cian Hennigan and Jack Meaning in a note. They now expect inflation to average 3.1% in 2026 and 3.0% in 2027, an upward revision of 0.1 and 0.5 percentage points respectively. Annual energy inflation rose to 13.8% in August from 9.8% in July. However, the rise in Bank of England's key interest rate they pencil in to 4.25% by February would create a meaningful amount of increased restrictiveness, weighing on the outlook for inflation, they say. Still, the loose labor market is containing risks of second-round effects, they say.
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