DAVY VIEW

Headline UK inflation was unchanged in August, remaining at a year-on-year (yoy) increase of 3.8% and increasing in month-on-month (mom) terms by 0.3%. While core and services inflation eased slightly below consensus, they remain high and we do not expect the Bank of England will be in a position to further ease policy this year until there is a clear sign that disinflation has resumed. Elsewhere, November’s Budget looks set to be very challenging for Labour, in part due to a lower expected productivity forecast by the Office for Budget Responsibility (OBR).