United Kingdom: Inflation remains at joint-lowest level since April 2021 in June
Inflation came in at 2.0% in June, matching May’s figure and in line with the Bank of England’s 2.0% target. June’s result represented the joint-weakest inflation rate since April 2021, but was marginally above market expectations. Moderating price pressures for recreation and culture and food and non-alcoholic beverages offset higher price pressures for transport and hospitality.
Annual average inflation fell to 4.1% in June (May: 4.6%). Meanwhile, core inflation ticked up to 3.6% in June from the previous month’s 3.5%.
Finally, consumer prices increased 0.11% over the previous month in June, a smaller increase than the 0.34% increase logged in May. June’s result marked the weakest reading since January.
Nomura analysts commented on the monetary policy outlook:
“The only component that was notably stronger than we had been assuming was accommodation, i.e. hotels […] At 5.7% y-o-y and 0.8% q-o-q the annual rate of growth of services CPI and quarterly growth rate of services PPI respectively are too strong for the Bank of England’s liking. This will undoubtedly make the MPC’s August decision a difficult one. With all of the upside miss in services inflation in [the June] report being due to a single factor, that might still allow the Bank to lower rates on 1 August – as we currently expect.”