UK inflation held steady at 2 per cent in June, slightly above expectations, as the Bank of England considers whether to cut interest rates from their current 16-year high at its next meeting.
Wednesday’s annual consumer price data from the Office for National Statistics was above analysts’ forecasts of 1.9 per cent and remained at the BoE’s target level, which it hit in May for the first time in three years.
The data marked the last such release before the Monetary Policy Committee’s August 1 rates announcement. The MPC is due to decide whether to cut interest rates from their current 5.25 per cent.
The higher-than-expected inflation figure comes hours before UK Prime Minister Sir Keir Starmer is set to deliver the King’s Speech, in which he will lay out plans to “take the brakes off Britain” in a bid to spur economic growth.
Rate-setters at the BoE are carefully watching movements in services prices, which they see as a key gauge of underlying inflationary pressures. Services inflation was steady at 5.7 per cent in June, slightly ahead of analyst expectations for a decline to 5.6 per cent.
Sterling edged higher following the release, with the pound up 0.1 per cent at $1.2982 as traders reacted to the stronger-than-expected services figure.
Ahead of futures markets opening, traders were evenly split on whether the BoE would deliver its first 0.25 percentage interest rate cut on August 1.
Core inflation, which strips out energy and food, rose by 3.5 per cent in the 12 months to June 2024, the same rate as in May and in line with analyst forecasts.
The BoE will also look at UK labour market data due to be released on Thursday for a further indication of the strength of the economy as they weigh when to cut rates. (Financial Times)
