"[…] we should be expecting sub-2 percent inflation readings well before the end of the year"
- ING Groep NV, London, UK
U.K. inflation unexpectedly slowed to its lowest level since November 2009, due to a fall of clothing prices.
While economists expected unchanged rate at 2.8%, CPI annual inflation was 2.4% in June, down from 2.8% in May, said the Office for National Statistics. The declining inflation forced the BOE to increase its asset purchase programme by 50 billion pounds this month.
"The recent rise in oil and food commodity prices indicates that the pace of declines will slow, but the weak corporate pricing power environment still suggests we should be expecting sub-2 percent inflation readings well before the end of the year," said James Knightley, Senior Economist at ING Groep NV in London. "This gives the Bank of England plenty of room to respond aggressively to the downturn in activity and we suggest that the BoE's Asset Purchase Facility will be expanded to 450 billion pounds by the end of 2012."
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