U.K.s headline annual pace of inflation stable at 2.4 pct in May

U.K.’s annual pace of inflation came in stable at 2.4 percent in the month of May, after recording three straight months of decline. The outturn was consistent with market projections. The report released indicated the first signs of the recent rise in global oil prices.

This was clearly noticed in motor fuel prices, which recorded a rise of 3.8 percent sequentially in May. All else being equal this would have pushed up the annual pace of inflation by 0.2 percentage points.

That the annual pace of headline inflation did not accelerate in May is mainly because of the ongoing downward influence to inflation from unwinding of previous currency effects, noted Lloyds Bank in a research report. The main downward surprise came in recreation and cultural items, with widespread falls noted throughout this category.

However, in the months ahead, the feed through from increased oil prices is expected to become more marked and further to the effect of already announced rises in utility prices should provide a boost to inflation, stated Lloyds Bank.

Along with increasing evidence that the tightness of the labor market and subdued productivity growth are feeding through to higher unit labor costs, these factors might lead to inflation proving more ‘sticky’ than it has done so far in 2018, tempering the pace at which it falls towards the Bank of England’s 2 percent target, added Lloyds Bank.

At 13:00 GMT the FxWirePro's Hourly Strength Index of British Pound was slightly bearish at -56.9602, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 1.88672. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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