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MNI BRIEF: UK Inflation Downside Surprise, Offers BOE Respite

(MNI) London

UK again inflation rose at a level well above the Bank of England's target in June, but the pace of increase was slower than in recent months and below the expectations of financial markets, perhaps giving Threadneedle Street the opening to hike Bank Rate by just 25 bps in August..

Headline CPI rose 7.9% y/y, the Office for National Statistics said, down from 8.7% in May and below the 8.2% expected by a median survey of City economists. Core inflation, closely watched by policymakers, rose 6.9% y/y, slower than the 7.1% seen in both May and by analysts in their latest survey. Services inflation eased somewhat, dipping to 7.2% from 7.4% in May.

“Inflation slowed substantially to its lowest annual rate since March 2022, driven by price drops for motor fuels. Meanwhile, core inflation also fell back after hitting a thirty-year high in May," ONS Chief Economist Grant Fitzner said: “Food price inflation eased slightly this month, although it remains at very high levels," he added. (MNI INTERVIEW: Real Wage Growth Boost In Coming Months For UK)

The BOE's Monetary Policy Committee meets in early August, with focus on the prices and wages. With data still requiring further action by policymakers to bring inflation back to target, City economists were split on whether August 3 would see a hike of 25 or 50 bps -- the latest inflation prints may just give them the space to hike 25 bps to 5.25%.




MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
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MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
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