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UK inflation tops Bank of England target

UK inflation for May rose slightly faster than forecast to 2.1% year-on-year and is the highest level of inflation seen in nearly two years.

16 June 2021

UK inflation for May rose slightly faster than forecast to 2.1% year-on-year and is the highest level of inflation seen in nearly two years. This transient inflation surge explained away by many central bank chiefs is at risk of becoming something more permanent or at least that continues to be the overhanging concern for markets. The current trajectory of inflation should be no real surprise as the world economy begins the slow steps out of virus related lockdowns (albeit delayed for another month in the UK) and year-on-year comparisons will inevitably look at the headline level as somewhat surprising with the base effects of last year now firmly priced in. Our expectation is that these inflation overshoots will be a temporary phenomenon we will see for a few more quarters yet before falling back nearer to the central bank target level.

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Charles Hepworth

Investment Director
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