Summing up, we are likely to see a sharp pickup in inflation over the coming year. Initially this will be largely due to base effects related to last year's sharp drop in petrol and energy prices, but the weaker pound will become increasingly influential. Though competitive pressures are likely to weigh on the degree of pass-through, we still expect CPI inflation to accelerate to average 2.7% in 2017, including a brief period in the summer where it exceeds 3%. However, the literature suggests that the bulk of the impact of such a depreciation would be seen within a year, so the fragile economic backdrop - in particular subdued wage growth and weak pricing power - should bring inflation back to the 2% target during 2018.
展开▼
