Investing.com - U.K inflation surprised to the upside in January, and Deutsche Bank (ETR:DBKGn) expects the headline consumer price index to continue heading higher in February, before retreating the following month.
The U.K. Consumer Prices Index rose by 3.0% in the 12 months to January 2025, up from 2.5% in the 12 months to December 2024.
Analysts at Deutsche Bank expect prices to continue rising in February, seeing CPI reaching 3.14% year-on-year.
“As part of our updated projections, we expect the ONS index collection day to land on the 18th of February. This could have important implications for travel, hospitality and leisure services, given that it would sit in the middle of half-term week in the U.K.,” analysts at Deutsche Bank, in a note dated March 24.
Food prices continue to budge higher, Deutsche Bank said. “PPI pressures have increased. UN FAO data are also consistent with an increase in input costs. And Bank Agents have reported that retailers have started to pass on costs associated with the Extended Producer Responsibility for packaging regulations.”
Away from food, we expect upward pressure from both tobacco and alcohol prices.
Energy prices will grind higher in February – at least on a month-on-month basis.
“Our pump price trackers point to meaningful uplift in the second month of the year. But given the stronger print registered in January, relative to our models, we expect a little negative payback for CPI,” Deutsche Bank said.
March CPI, we think, will likely push lower on the back of negative base effects, the German bank added.
“But thereafter, we see a steep ascent in price pressures, with headline CPI peaking near 4% y-o-y in Sep-25. The good news is that we still expect inflationary pressures to slowly subside, dropping to around 2% in H2-26. But upside risks to our 2026 projections are rising.”