British
inflation
held at 2.0 per cent last month, defying forecasts for a slight fall, and underlying price pressures persisted, maintaining uncertainty about the date of the
Bank of England
‘s first
interest rate cut
since 2020.
Economists polled by Reuters had mostly expected headline consumer price inflation would ease to 1.9per cent in the 12 months to June, extending its drop from a peak of 11.1per cent in October 2022.
Inflation for services was much stronger at 5.7 per cent, the
Office for National Statistics
said, unchanged from May. The Reuters poll had pointed to a slightly weaker 5.6per cent increase.
Sterling rose against the dollar immediately after the data was published.
The BoE – which has a target of consumer price inflation of 2 per cent – has expressed concern about the strength of services inflation, which largely reflects pressure from wage growth in a labour market short of candidates to fill jobs.
Data due on Thursday is expected to show wages growing slightly less strongly than in data published a month ago but still rising by almost 6per cent – roughly double the rate that would be compatible with keeping inflation at 2per cent.
The BoE is due to announce its next decision on interest rates on Aug. 1 and investors see a roughly 50per cent chance of a first cut to borrowing costs since 2020.
A rate cut next month would give an early boost to new
Prime Minister Keir Starmer
and his finance minister Rachel Reeves who have said they will speed up the slow-moving
British economy
after winning power in a landslide election two weeks ago.
But last week the BoE’s Chief Economist, Huw Pill, said he was focused on persistently strong price pressures and said the timing of the first rate cut was an open question.
Core inflation – excluding volatile food and energy prices – held at 3.5 per cent in the 12 months to June, the ONS said, matching the median forecast in the Reuters poll.
The BoE had expected headline inflation of 2.0 per cent in June and services inflation of 5.1per cent, according to forecasts it published two months ago. The BoE also expected headline inflation to rise back above its target later this year and through 2025.
