Shoppers stroll along Rochester’s high street on Tuesday, July 16, 2024. Chris Ratcliffe | Bloomberg | Getty Images
U.K. inflation edged up to 2.2% in July, slightly below the anticipated 2.3% but exceeding the Bank of England’s 2% target, according to the Office for National Statistics. This marks a rise from May and June’s 2% figures. The uptick was linked to housing and household services, particularly as gas and electricity prices dropped less than the previous year. Core CPI, excluding volatile items like food and energy, eased to 3.3% from 3.5% in June. Services inflation, closely watched by the Bank of England, decreased to 5.2% in July from June’s 5.7%.
Following the data release, the pound dipped to $1.2831 by 9:09 a.m. in London. Rates had been cut earlier this month, the first time in over four years, lowering the key bank rate to 5% from a 16-year peak of 5.25%.
Economists note that inflation might rise again in late 2024, with the Bank of England’s next steps uncertain. George Boubouras of K2 Asset Management suggested gradual rate cuts, citing persistent services inflation. The probability of maintaining current rates in September is about 55%, with more than a 90% chance of a November cut, per LSEG.
Meanwhile, U.K. job data revealed a pay rise of 5.4% year-on-year from April to June, the lowest in two years, while unemployment dipped to 4.2% from 4.4%.
Sanjay Raja of Deutsche Bank emphasized that upcoming inflation and labor data would be crucial, indicating a potential rate cut in September. While not his base case, Raja acknowledged an increasing likelihood of multiple rate cuts within the year.
The situation remains fluid, with further decisions pending the next rounds of economic data.
Original Story https://www.cnbc.com/2024/08/14/uk-inflation-july-2024.html
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