Static inflation puts August rate rise in doubt

Lloyd Doyle
July 19, 2018

Inflation rates hit a one-year low after remaining the same as the previous month of June.

Inflation remained at 2.4% for the third month in a row in June, according to the Office for National Statistics, after clothing prices fell.

She said: "The GBP/EUR exchange rate languished at a four-month low on Wednesday as United Kingdom inflation data fell short of forecasts". Core inflation was significantly weaker than expected at 1.9 per cent year-on-year, which will make it more hard for the Bank of England to raise rates, particularly given a backdrop of Brexit and trade uncertainty.

Inflation based on wholesale prices, which touched a 4-year high in June, seems to have peaked for this financial year, and is expected to glide down to around 4.1 per cent by March 2019, says a report.

"That's particularly the case after yesterday's wage growth data emerged weaker than expected at 2.5% including bonuses".

Ben Brettell, senior economist, Hargreaves Lansdown, said: 'All in all these numbers don't alter the economic picture of anaemic growth, a relatively tight labour market and under-control inflation.

Tom Stevenson, investment director for personal investing at Fidelity International, said it looks odds-on that the BoE will hold fire yet again on a rate rise.

It marks the highest level for both petrol and diesel since September 2014.

However, the summer sales weighed on inflation after clothing prices were cut, in particular on men's fashion.

All eyes are now on inflation data, set to be released tomorrow, and tipped to see an acceleration in the rising cost of living due to higher petrol and energy prices. Month-on-month, output prices gained 0.1 percent from May, when it rose by 0.5 percent.

Prices of pulses have continued to slump for over a year now, with the rate of decline relatively slowing at (-) 20.23 percent in June, as compared with a de-growth of (-) 21.13 percent in May.

While inflation remains above target, economists said the cost of living measure was gradually falling from its peak of 3.1% in November as the effects of the Brexit vote - which pushed up the cost of imports to Britain - begin to fade.

'August's expected rate hike is, therefore, even less of a dead cert than it was before today's surprise inflation print.

The Consumer Prices Index including owner-occupiers' housing costs (CPIH) - the ONS's preferred measure of inflation - was 2.3% in June, in line with May's reading.

Meanwhile, monthly input price inflation eased notably to 0.2 percent from 3.3 percent in May. House prices across the United Kingdom also rose at the slowest pace in almost five years.

Other reports by Iphone Fresh

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