The rate of UK inflation fell back from 0.1% yoy to 0.0% precisely in June. That seems innocuous enough but the details provide some insights into the price outlook. The impact of the rise in the pound last year on UK inflation has been widely discussed by members of the BoE MPC in particular.



It is clear that the major impact on overall inflation has been via the non-energy industrial goods component. The UK is a price taker on world goods markets as the domestic manufacturing base has contracted and so movements in the exchange rate have a direct impact on goods prices.



"What is expected to be seen in the latest data was that the downward impact on goods price inflation had peaked but in fact it continues to intensify. Thepound has continued to appreciate over the last few months and this could deliver further reductions in goods inflation", says Societe Generale.