UK inflation fell to a 15-month low of 7.9 per cent in June, a bigger than expected drop that sent the pound falling, rallied property shares and came as a boost for prime minister Rishi Sunak. Wednesday’s figures led investors to trim their expectations of an interest rate rise, with markets now betting on a quarter rather than half point increase at the Bank of England’s next meeting on August 3.
Sterling fell to its lowest level in a week, trading down 1.1 per cent against the dollar at $1.2897. Annual inflation was down from 8.7 per cent in May, the Office for National Statistics said, below the 8.2 per cent predicted by a Reuters poll and ending a four-month run during which inflation outstripped forecasts. “With significant inflation falls now coming through, the UK is less of an outlier in the battle to tame inflation,” said James Smith, research director at the Resolution Foundation think-tank.
Aided by a drop in the cost of motor fuels, the headline figure was the lowest since March 2022, while underlying “core” inflation fell slightly to 6.9 per cent. Paul Dales, economist at Capital Economics, said that while the slide in inflation was unlikely to deter the BoE from increasing rates next month, “it may tilt the balance towards a 25 basis points hike rather than 50 basis points”.
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Source: www.ft.com
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