View more on these topics

Deflation predicted to return as oil prices fall

Falling oil prices will likely lead to another bout of deflation and means the Monetary Policy Committee should “take its time over raising interest rates”, says Capital Economics.

The price of oil is at a six-month low, with a barrel now costing under $50.

CPI inflation was 0 per cent in July, although core inflation – which is a measure that strips out certain items that face volatile price movements – was at 0.8 per cent.

Capital Economics says “domestic price pressures are still weak”, meaning inflation is likely to strengthen only gradually next year.

Capital Economics senior UK economist Samuel Tombs says: “Looking ahead, inflation is likely to turn negative again for a couple of months. Supermarket competition should drive petrol prices down before long. In addition, British Gas will cut its gas prices by 5 per cent in late August and other utility companies are likely to follow suit.

“And while inflation is likely to strengthen when the anniversary of the sharp fall in oil prices in late 2014 is reached, we expect it to remain below the MPC’s 2 per cent target during 2016. Although pay growth has risen, productivity is reviving too, keeping a lid on firms’ unit wage costs.

“Meanwhile, weak growth in global demand and a supply overhang should keep commodity prices subdued. As a result, the MPC should be able to take its time over raising interest rates next year.”

Recommended

Alan-Hughes-MM-Peach-700.jpg

Foot Anstey: The FCA’s clear warnings on staff pressure tactics

The FCA has released finalised guidance on performance management for firms (FG15/10). This is aimed at all firms that have staff dealing directly with retail customers. It can be tempting to think that it applies only, or mainly, to banks and other firms with a vast direct sales force but the regulator has made it […]

Bank-of-England-BoE-Building-Horse-700x450.jpg

‘Super Thursday’ brings ‘no change’

Just one member of the Monetary Policy Committee voted to increase the base rate at last week’s meeting. The minutes from the meeting show Ian McCafferty voted to increase the base rate by 25 basis points to 0.75 per cent. McCafferty believed the risks of overshooting the Bank’s medium-term inflation target of 2 per cent […]

Legal-and-General-LG-700.png

L&G to cut hundreds of jobs following Kingswood closure

Legal & General will slash a minimum of 250 jobs following its decision to close the flagship Kingswood office. In June, Mortgage Strategy’s sister title Money Marketing revealed the insurer was planning to leave its iconic Surrey headquarters. A note sent to all staff from the HR department, seen by Money Marketing, confirms the office […]

FSCS-Piggy-Bank-Alt-500x320.jpg
3

9 in 10 brokers say FSCS is in need of reform

Nearly nine in 10 mortgage professionals believe the Financial Services Compensation Scheme needs reform. A poll of 122 Mortgage Strategy readers shows 88 per cent believe it is time for a change to the way brokerages are levied. The poll comes after broker anger that they are having to “pick up the bill for miscreants” […]

Navigating volatility

The making of any fund can be seen in how it responds to crises and opportunities. In this short video, Head of Multi Asset at Royal London Asset Management Trevor Greetham outlines how the Royal London Global Multi Asset Portfolios or GMAPs navigated through Brexit and the US election cycle. He also highlights the importance […]

Newsletter

News and expert analysis straight to your inbox

Sign up