UK inflation unexpectedly rose to 3.6% in June
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UK inflation unexpectedly rose to 3.6 per cent in June, in a setback for the Bank of England as it seeks evidence that price pressures are cooling alongside slowing economic growth.
Wednesday’s figure from the Office for National Statistics exceeded the prediction of analysts polled by Reuters that inflation would remain at May’s level of 3.4 per cent.
The pick-up in inflation was driven by higher prices for petrol, airfares and rail tickets, the ONS said.
The BoE is deliberating whether to cut its key interest rate again as soon as August. In June, the Monetary Policy Committee voted six to three to keep rates unchanged at 4.25 per cent, following a quarter-point cut in May.
The MPC, which has an inflation target of 2 per cent, has reduced interest rates four times since last summer but policymakers remain divided over how persistent price pressures will prove.
Core inflation, which excludes energy and food, was 3.7 per cent in June, up from 3.5 per cent in May, the ONS said.
Services inflation, a key gauge of price pressures for the MPC, was unchanged from May’s 4.7 per cent, exceeding the 4.6 per cent predicted by economists.
The pound strengthened following the release of the figures, rising 0.2 per cent to $1.340.
Prior to June’s data, traders were betting on at least two more quarter-point cuts from the BoE by the end of the year, according to levels implied by swaps markets.
Pooja Kumra, a rates strategist at TD Securities, said the figures were “another bump in the road for the BoE”, adding that they suggest the MPC would continue to “apply the ‘gradual and careful’ approach to interest rate cuts”.
