Skyline view of the financial district of the City of London.
Mike Camp | In pictures Getty Images
LONDON — UK inflation cooled significantly in June, coming in below consensus expectations at 7.9 percent annually.
Economists polled by Reuters had forecast an annual rise in the headline consumer price index of 8.2%, after May’s expected 8.7% reading, but annual price increases ran well above the Bank of England’s 2% target.
On a monthly basis, headline CPI rose 0.1%, Below the consensus forecast of 0.4%. Core inflation – which includes volatile energy, food, alcohol and tobacco prices – remained sticky at an annualized 6.9%, but fell from a 31-year high of 7.1% in May.
Falling motor fuel prices were the biggest downward contributor to the monthly change in the annual rate of CPI, the Office for National Statistics said on Wednesday. Food prices rose in June 2023 but less than in June 2022.
The UK has experienced persistently high inflation, which both the government and the Bank of England have warned could seep into the economy as a cost-cutting crisis and hard fuel wage increases in the labor market.
Bank of England Governor Andrew Bailey and UK Chancellor of the Exchequer Jeremy Hunt told an audience in London earlier this month that high-wage settlements were undermining their efforts to control inflation.
The Organization for Economic Co-operation and Development predicted last month that the UK would experience the highest level of inflation of all advanced economies this year, with a headline annual rate of 6.9%.
The Bank of England last month imposed a bumper 50 basis point interest rate hike, its 13th in a row, as the Monetary Policy Committee struggles to curb demand and rein in inflation.
Markets are pricing in another aggressive half-point hike to 5.5% at the MPC’s August meeting, after the UK’s base rate moved from 0.1% to 5% over the past 20 months.