Inflation in the U.K. fell more than anticipated in June, and the closely monitored core rate also decreased. This is good news for the Bank of England policymakers as they determine how firmly to respond to persistently high price pressures at their next meeting in August. According to the Office for National Statistics, consumer prices increased 7.9% in June compared to the same month a year earlier, a decrease from the 8.7% increase seen in May.
The Wall Street Journal interviewed economists who predicted inflation would fall by 8.1%.
Core inflation, which the BOE closely monitors and which excludes the volatile areas of food and energy, was 6.9% in June when it was anticipated that it would remain stable at May’s rate of 7.1%. The first autumn since January was this one.
Similarly, motor fuel prices fell approximately 22.7% this year until June. This drove the downward direction of the index, while food inflation also eased to 17.3% on-year in June, from 18.7% in May, the ONS said.
When compared to May, annual price increases for accommodation, food, clothing, and household goods all eased down in June. Although the headline inflation rate came in below predictions, it is still significantly higher than the BOE’s target of 2%. Investors anticipate the central bank to continue raising rates at its upcoming meeting on August 3, which it has done 13 times already. However, they are different opinions on whether it will be a 25-point or 50-point increase.
After May’s inflation came in higher than anticipated, the bank surprised the markets by hiking its current key bank rate by a half percentage point, or more, to 5% at its meeting in June. However, the BOE anticipates a significant decrease in inflation through the remainder of 2023 due to falling energy prices and additional supply bottleneck relief.
The U.K. still has higher inflation than many comparable countries, though. German inflation was 6.8%, French inflation was 5.3%, Italian inflation was 6.7%, and Spanish inflation was 1.6% in June, according to the harmonised measurements of the European Union. Inflation in the eurozone was 5.5% in June, down from 6.1% in May, while it was 3.0% in the U.S.