BoE Inflation report likely to say CPI nearing target

The Bank of England's guide to the future for UK inflation trends is due for release on Wednesday, with most economists expecting Britain's central bank to predict the consumer prices index (CPI) inflation rate returning to its 2pc target level sooner rather than later.

The last report from the Bank of England (BoE) in May suggested CPI would drop to target around the beginning of 2013. In June the figure was 2.4%.

The price of oil will be one major factor in the forecast, with average prices having slumped from $120 per barrel to around $105 in the face of weakening growth in China and the dire economic picture in Europe.

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British retailers have also been making fierce price cuts in a battle to win market share, and this should also filter through into the CPI number.

There are dangerous variables that the BoE has to contend with,however; a current drought in the US may push up food prices, while if the Eurozone crisis worsens the pound may weaken against the dollar and the renminbi, pushing up the cost of a host of imported goods.

BS