September 20, 2021
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UK: energy jump into a forward roll down

  • Gas and electricity prices have jumped amid a perfect storm of supply pressures, especially in the UK, where the infrastructure has failed in storage and through fire.
  • The extreme moves concentrate this winter, causing our typically accurate model to suffer. We now implement the regulator’s full model. The peak RPI y-o-y impact now looks less to us, at 89bps, and a small cut could occur with contract rolls in Oct-22.

September 17, 2021
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EA: missing clothing sales in Aug-21

  • EA HICP inflation for Aug-21 was confirmed at a low 3.0% y-o-y, while the ex-tobacco index printed at 107.54 (0.03 below our forecast). Clothing caused more of the rise than we expected amid missing sales, offset by less strength in housing and transport.
  • The lack of discounting means there is less room to normalise higher, so we trim our Sep-21 forecast by 6bps to 3.2% y-o-y. Our forecast remains above the consensus and ECB from Nov-21 onwards, but we still see it slipping below the target through H2 2022.

September 16, 2021
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Inflation expectations start stretching

  • New price shocks stretch the peak and persistence of excess inflation. Although we still see this pressure as transitory, we are mindful of the risk expectations might shift. The responsiveness of inflation forwards to spot changes is most concerning.
  • Wage negotiations will be the ultimate check, albeit lagging behind expectations and our statistical measures of underlying inflation. Wages corroborate hawks in Norway, less dovish pressure in the UK and Sweden, while the Euro area remains in a low rut.