The UK CPI inflation data for March is due on Tuesday and is expected to show negative reading. The large divergence in headline and core CPI shows the impact that lower energy prices have had on headline inflation. This divergence will likely persist until the dramatic oil-price fall in late 2014 either fades out of the 12-month CPI calculation or oil prices move up significantly. According to Standard Chartered, CPI to have moved into negative territory in March, to -0.2% y/y from 0.0% prior, and core CPI to have eased to 1.1% y/y from 1.2%. Some indirect effects (e.g., goods and services benefitting from cheaper oil), and deflationary pressures from the euro area are likely dragging core CPI down as well. The Bank of England is closely monitoring developments in the labour market for signs that wages are accelerating.
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