Wednesday’s data showed that annual services price inflation fell to 5.2 per cent in July from June’s 5.7 per cent | Photo: Bloomberg
British consumer price inflation rose to 2.2 per cent after two months at the Bank of England’s 2 per cent target, a slightly smaller increase than economists expected, and services inflation, closely watched by the BoE, slowed sharply, official data showed.
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Economists polled by Reuters had forecast the annual headline CPI rate would rise to 2.3 per cent.
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Sterling fell sharply against the U.S. dollar after the data was published on Wednesday.
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When the BoE cut interest rates from a 16-year high of 5.25 per cent at the start of this month, it said May and June’s 2 per cent inflation readings probably marked a low point for inflation.
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The central bank expected CPI to rise to 2.4 per cent in July and reach around 2.75 per cent by the end of the year as the effect of sharp falls in energy prices in 2023 faded, before returning to 2 per cent in the first half of 2026.
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British inflation peaked at a 41-year high of 11.1 per cent in October 2022 driven by a surge in energy and food prices after Russia’s full-scale invasion of Ukraine as well as COVID-19 labour shortages and supply chain disruption.
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The BoE remains relatively focused on longer-term inflation pressures, including services prices and wages as well as general labour market slack.
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Wednesday’s data showed that annual services price inflation fell to 5.2 per cent in July from June’s 5.7 per cent, lower than the Reuters poll forecast of 5.5 per cent and the lowest since June 2022.
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BoE staff had predicted a drop to 5.6 per cent.
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Official data on Tuesday showed that annual wage growth excluding bonuses slowed to its lowest in nearly two years at 5.4 per cent, in line with economists’ forecasts but still nearly double the rate the BoE sees as consistent with CPI staying at 2 per cent.
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First Published: Aug 14 2024 | 1:07 PM IST