United Kingdom: Inflation increases in July but undershoots forecasts
Inflation came in at 2.2% in July, up from June’s 2.0% but below market expectations. The rise was driven by higher price pressures for housing and household services, and clothing.
The trend pointed down, with annual average inflation coming in at 3.7% in July (June: 4.1%). Meanwhile, core inflation fell to 3.3% in July from June’s 3.6%, while services inflation—closely tracked by the Bank of England—was well below expectations.
Lastly, consumer prices fell 0.18% in July over the previous month, swinging from June’s 0.11% rise. July’s result marked the weakest reading since January.
On the monetary policy implications, Nomura analysts said:
“At 5.2% the UK’s July services inflation print missed significantly on the downside today. Even our below-consensus forecast proved too high. The Bank of England’s forecast (5.6%) was missed to the downside by some 0.4pp. […] when it comes to assessing the trend in domestic inflation the BoE will continue to focus on services CPI. That should support the case for quarterly cuts, resuming in November.”