Weaker-than-anticipated CPI data, alongside a slowdown in service inflation, strengthens the case for the Bank of England to consider easing policy at its upcoming meeting.
Gianluca, is the persistence in rent inflation, albeit decelerating, a greater problem for UK given that is often a larger share of spend than CPI baskets suggest? Same question for US. Thx
Yes, I do think it continues to be a drag on service inflation, particularly because its effects propagate beyond its direct measure and as an input cost. It likely accounts for a larger share of household spending than what the CPI basket implies. In this post (https://gianlucabenigno.substack.com/p/is-the-bank-of-england-in-a-catch?r=nm3g), I discussed the policy role in amplifying housing costs.
In the U.S., I see a similar issue, though the role of interest rate policy is arguably less significant in that context.
Gianluca, is the persistence in rent inflation, albeit decelerating, a greater problem for UK given that is often a larger share of spend than CPI baskets suggest? Same question for US. Thx
Yes, I do think it continues to be a drag on service inflation, particularly because its effects propagate beyond its direct measure and as an input cost. It likely accounts for a larger share of household spending than what the CPI basket implies. In this post (https://gianlucabenigno.substack.com/p/is-the-bank-of-england-in-a-catch?r=nm3g), I discussed the policy role in amplifying housing costs.
In the U.S., I see a similar issue, though the role of interest rate policy is arguably less significant in that context.