U.K. Inflation Rate Falls, Weighing on Bank of England's Decision
The inflation rate in the U.K. declined more than anticipated in July, primarily due to lower energy prices. However, the core rate, which excludes food and energy, remained steady, placing the Bank of England under pressure as it contemplates whether to raise interest rates next month.
According to data from the Office for National Statistics, consumer prices in July were 6.8% higher than the same period the previous year. This marked a decrease from the 7.9% increase recorded in June, making it the lowest rate since February 2022.
Economists surveyed by The Wall Street Journal had predicted a decline to 6.9% for July's inflation rate.
Contrarily, core inflation, which provides a more stable measure by excluding volatile categories such as food and energy, matched June's rate of 6.9% in July. This came as a surprise as experts had anticipated a slight decrease to 6.8%.
The Bank of England now faces additional challenges since U.K. wage growth has surpassed expectations. Policymakers are concerned because strong wage increases could hinder their efforts to control rising prices.
According to the Office for National Statistics, regular wage growth (excluding bonuses) soared to 7.8% year-on-year in the three months leading up to June. This is the fastest rate since comparable records were established in 2001 and suggests that U.K. wages are now growing at a faster pace than prices.
Even though the headline inflation rate is declining, it still remains considerably higher than the central bank's target of 2%.
Inflation in the U.K. Expected to Fall, but Remains High
Energy Prices Drive Inflation Down
Food Prices Also Contribute to This Trend
Summer Travel Boosts Inflation
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