Press release

14 Dec 2022 London, GB

Inflation begins its descent – EY ITEM Club comments

Martin Beck, Chief Economic Advisor to the EY ITEM Club, reacts to the latest Consumer Price Index (CPI) inflation data.

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  • UK Consumer Price Index (CPI) inflation fell slightly in November. The modest cooling in inflation was primarily driven by transport, where there were base effects due to significant month-on-month increases in petrol prices last November.
  • The EY ITEM Club views last month's 75bps rate rise as a special case and there is nothing in the inflation data to suggest the Monetary Policy Committee (MPC) needs to continue increasing rates at such a pace. Therefore, the EY ITEM Club expects the MPC will pivot to a 50bps rise in tomorrow's meeting

Martin Beck, chief economic advisor to the EY ITEM Club, says: “CPI inflation fell to 10.7% in November, from 11.1% in October. A smaller contribution from petrol, caused by base effects following a substantial month-on-month increase in fuel prices last November, meant transportation was the primary driver behind inflation falling back. 

“The EY ITEM Club thinks October was likely the peak for inflation. Falling food commodity prices suggest food price inflation is close to its peak, large base effects are likely to come into play for energy prices next year, and weaker activity is expected to cool core inflation. Therefore, the EY ITEM Club expects inflation to soften next year. However, the delayed pass-through of weaker sterling and higher energy costs for businesses mean the EY ITEM Club thinks inflation could be sticky, and it could be some time before the CPI measure falls back to the 2% target.

“In November's MPC meeting, the committee was under significant pressure to meet market expectations and restore confidence in the UK economy following the effects of the 'mini-budget', delivering a 75bps rate increase. The EY ITEM Club views November's decision as a special case and there does not appear to be anything in the inflation data to suggest the committee needs to continue with rate rises at such a pace. Therefore, the EY ITEM Club expects the MPC will pivot to a 50bps rate increase in tomorrow's meeting.”