UK CPI Preview: Forecasts from five major banks, shocker inflation

The United Kingdom will release the April Consumer Price Index (CPI) data on Wednesday, May 18 at 06:00 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of five major banks regarding the upcoming UK inflation print.

Economists expect the headline UK CPI to have jumped from 7% YoY in March to 9.1% in April.

ING

“Headline UK inflation is set to rise by more than two percentage points, reflecting the 54% rise in household energy prices that came through at the start of the month. We think there are probably enough factors to push inflation slightly above 9% in April. It’s worth saying though that this is already baked into the Bank’s forecasts, which anticipate a double-digit reading later this year. We’re less sure it will get as bad as that, but then again inflation has consistently surprised to the upside.”

TDS

“Inflation is set to surge on the increase in the energy price cap and VAT changes in April. We look for the headline rate to soar to 9.2% YoY and core inflation to come in at 6.4%. The labour market likely remained tight, with the unemployment rate staying put at 3.8% and ex-bonus and headline wage growth coming in at 4.1% and 5.3% 3m/y respectively.”

SocGen

“A 54% increase in Ofgem’s utilities price cap will largely be responsible for inflation surging by 2pp to 9% YoY in April. This could be the peak, although inflation will likely remain elevated throughout the remainder of the year. Core inflation is also expected to increase from 5.7% to 5.9% in April due to the temporary reduction in VAT for the hospitability industry reversing and a strong seasonal increase from the Easter holidays occurring in mid-April.”

Citibank

“UK CPI Inflation, April: Citi Forecast 9.2% YoY, Previous 7.0% YoY (BoE: 9.1% YoY (May MPR)); CPI Core, April: Citi Forecast 6.1% YoY, Previous 5.7% YoY (services inflation picking up).”

Wells Fargo

“In April, consensus economists expect inflation to spike above 9% YoY as energy and food prices remain elevated amid the ongoing conflict in Ukraine. In our view, 2022 UK inflation is on track to be 6.9% on an annual average basis. While the Bank of England has started tightening policy and recently turned more aggressive, we expect BoE policymakers to continue lifting interest rates. However, BoE policymakers are in a difficult position. Growth prospects are dim and economic activity is slowing quickly, so much so that policymakers are warning of a potential recession in the near future. But, in the battle between supporting the economy and containing inflation, we ultimately believe elevated inflation will matter more and BoE rate hikes are likely to continue.”