Alexander Spatari | Moment |
Inflation in the UK remained stable at the Bank of England's target of 2% in June, data from the official statistics office showed on Wednesday.
The leading index exceeded analysts' expectations by 1.9%, according to a Reuters poll of economists, and was in line with the previous reading of 2% in May.
Shortly after the release, the pound rose slightly, trading at $1.2977 at 7:21 a.m. London time.
Inflation in the services sector – which is closely monitored by the BOE as it dominates the UK economy and reflects domestic price increases – was 5.7 percent in June.
Core inflation excluding energy, food, alcohol and tobacco was 3.5 percent, also at the same level as in May (3.5 percent).
According to the ONS, the greatest upward pressure came from higher restaurant and hotel prices, while the cost of clothing and shoes fell the most.
During the summer months, consumers spend more money on leisure activities, including cultural experiences and concerts when popular artists such as Taylor Swift, Bruce Springsteen, Pink and Sting tour the country.
Bank of England interest rate cut in focus
Investors are eyeing a possible rate cut in August as inflation rates showed signs of continued easing. Market expectations for such a cut faded shortly after the latest figures were released.
Jane Foley, head of foreign exchange strategy at Rabobank, said stubborn inflation in the services sector could prompt caution among BOE policymakers ahead of their meeting next month.
“It's far from being decided for August,” she told CNBC's “Squawk Box Europe” on Wednesday.
“I think a lot of members of the policy committee and a lot of economists will be watching services sector inflation and will be a little bit concerned,” she added.
Jonathan Haskel, a member of the Bank of England's Monetary Policy Committee, said last week that he believed interest rates should remain unchanged due to ongoing 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” due to the “uncomfortable strength” of wage growth.
The BOE's key interest rate has been at a 16-year high of 5.25% since August 2023, when inflation was 7.9%.
The figure published on Wednesday is the first since the British general election on July 4, but does not reflect the change of government. The new British finance minister, Darren Jones, said in a statement that prices were still too high.
“We are facing the legacy of fourteen years of chaos and economic irresponsibility. That is why this government is now taking the tough decisions to lay the foundations so that we can rebuild Britain and make every part of Britain better off,” he said on Wednesday.
Comments are closed.