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UK inflation remained stable in June, around the Bank of England’s 2% target, according to official national data released on Wednesday.
The headline figure was higher than analysts’ expectations of 1.9 percent, and in line with the previous figure of 2 percent recorded in May, economists polled by Reuters said.
The pound edged higher shortly after the release, trading at $1.2977 at 7:21 a.m. London time.
Services inflation, closely watched by the BOE given its dominance in the UK economy and its reflection of domestically generated price increases, remained at 5.7% in June.
Core inflation, excluding energy, food, alcohol and tobacco, stood at 3.5%, also in line with the 3.5% recorded in May.
Rising restaurant and hotel prices were the main cause of the upward pressure, while clothing and footwear costs saw the biggest falls, the ONS said.
Consumers increase their spending on leisure activities during the summer months, particularly cultural experiences and concerts, as big-name artists such as Taylor Swift, Bruce Springsteen, Pink and Sting tour the country.
Investors had been expecting a potential interest rate cut in August as headline inflation showed signs of a sustained slowdown. Market expectations of such a cut faded just after the latest figures were released.
Jane Foley, head of foreign exchange strategy at Rabobank, said persistent services inflation could prompt BOE officials to be cautious ahead of their meeting next month.
“It’s definitely not done yet for August,” she told CNBC’s “Squawk Box Europe” on Wednesday.
“I think many members of the policy committee and many economists will look at this service sector inflation and be a little concerned,” she added.
BOE Policy Committee member Jonathan Haskel said last week he thought rates should remain unchanged because of continued pressures in the labor market.
BOE chief economist Huw Pill added later in the week that the timing of a rate cut remained an “open question” because of the “uncomfortable strength” of wage growth.
The BOE’s main interest rate remained at 5.25%, its highest level in 16 years, since August 2023, when inflation was 7.9%.
Wednesday’s figures are the first since the UK’s July 4 general election, but they do not reflect the change in government. Britain’s new chief secretary to the Treasury, Darren Jones, said in a statement that prices remained too high.
“We are facing the aftermath of 14 years of chaos and economic irresponsibility. That is why this government is now taking tough decisions to repair the foundations so we can rebuild Britain and make every part of the country better off,” he said on Wednesday.
News Source : www.cnbc.com
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