UK
inflation
remained
at
2%
last
month,
the
Office
for
National
Statistics
confirmed
today.
Events
such
as
the
Taylor
Swift
Eras tour
in
June
and
the
European
Championship
helped
keep
prices
artificially
high
and
slightly
above
consensus
forecasts.
While
the
Consumer
Price
Index
(CPI)
is
exactly
at
the
Bank
of
England’s
(BoE)
2%
target,
services
inflation
and
core
inflation
remained
higher
than
forecast
in
June,
casting
doubt
on
the
timing
of
the
first
interest
rate
cut.
Core
CPI,
which
excludes
more
volatile
energy
and
food
prices,
was
forecast
to
fall
to
3.4%
in
June
but
remained
at
3.5%,
the
same
as
in
May.
Policymakers
are
more
concerned
about
core
CPI
because
it’s
falling
more
slowly
than
the
headline
rate
of
inflation
and
is
also higher than
that
measure.
Services
inflation
is
also
a
worry
for
the
BoE,
remaining
at
5.7%
last
month.
The
lack
of
movement
in
both
the
core
and
services
number
now
makes
an
August
1
rate
cut
less
likely,
economists
say.
This
is
a
change
from
the
UK’s
last
inflation
print,
when
headline
CPI
hit
target
and
financial
markets
increased
the
odds
of
an
August
cut,
as
indicated
by
futures
trading.
However,
Michael
Field,
european
market
strategist
at
Morningstar,
says
the
situation
is
not
perilous.
“UK
inflation
rose
by
2%
year
over
year
in
June.
This
is
a
slight
rise
month
over
month,
but
nothing
to
get
excited
about,”
he
says.
“This
level
stands
bang
in-line
with
the
Bank
of
England’s
2%
targeted
rate,
increasing
the
pressure
on
central
bankers
to
cut
interest
rates
at
next
month’s
meeting.
“The
counter
to
this
argument,
however,
is
that
the
UK’s
4.4%
unemployment
rate,
which
is
certainly
low
by
historical
standards,
is
loosening
from
its
nadir
of
3.6%
just
two
years
ago.
“Over
time,
savings
in
input
costs
should
also
flow
into
reduced
services
costs,
meaning
with
any
luck
services
inflation
should
also
decline.”
When
Will
The
Bank
of
England
Cut
Rates?
Economists
point
to
some
one-off
factors
for
June
that
had
an
impact
on
consumer
prices.
For
one,
Taylor
Swift’s
blockbuster Eras
tour
is
expected
to
have
pushed
up
hotel
and
restaurant
prices,
and
especially
in
London,
while
a
Summer
of
football
has
led
to
greater
spending
on
alcohol
and
fast
food.
Services
in
general
saw
higher
demand
and
higher
prices,
including
holidays,
cinema,
theatres,
concerts
and
haircuts.
This
trend
has
been
noticeable
since
the
end
of
the
pandemic
as
Britons
prioritise
experiences
despite
the
cost
of
living.
Simultaneously,
unseasonably
wet
weather
forced
clothes
retailers
to
discount
summer
clothes
last
month,
leading
to
a
fall
in
the
clothing
element
of
CPI.
Food
prices
rose
year-on-year,
but
at
a
much
more
modest
rate.
Wage
and
employment
data
due
tomorrow
(July
18)
will
also
likely
suggest
to
the
BoE
that
inflationary
pressures
are
still
embedded
in
the
economy.
Julian
Howard,
chief
multi-asset
investment
strategist,
at
GAM
Investments,
thinks
the
narrative
of
a
summer
rate
cut
may
have
been
blown
off
course.
“This
latest
inflation
print
is
unlikely
to
be
as
helpful
for
the
BoE
as
many
would
have
expected,”
he
says.
“Headline
inflation
is
at –
but
not
below –
target
and
is
clearly
vulnerable
to
a
pop
above
target
again
in
the
coming
months.
For
both
the
Federal
Reserve
and
BoE
now,
the
inflation
course
is
just
not
the
clear
signal
to
action
that
it
once
was.”
When
Will
The
Bank
of
England
Cut
Rates?
At
the
last
Bank
of
England
meeting,
seven
MPC
members
voted
for
a
hold
versus
two
voting
for
a
cut.
Those
in
the
hold
camp
wanted
to
see
“more
evidence
of
diminishing
inflation
persistence
[…]
before
reducing
the
degree
of
monetary
policy
restrictiveness.”
The
Bank
itself
is
predicting
a
rise
in
CPI
back
to
2.5%
towards
the
end
of
the
year.
The
lack
of
change
in
the
headline
CPI
number
belies
the
changes
in
the
wider
economy
since
the last
inflation
print
was
released
on
June
19.
A
new UK
government
took
control
on
July
5
after
14
years
of
Conservative
rule.
With
a
massive
majority,
the
new
Starmer
administration
has
a
substantial
mandate
to
implement
a
range
of
new
fiscal
measures.
GDP
for
May
was
stronger-than-expected
at
0.9%
and
sterling
has
gained
against
major
currencies,
helped
by
the
end
of
political
uncertainty.
Whether
this
trajectory
will
continue
remains
to
be
seen.
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