UK inflation surprise

Inflation in the UK fell more than expected in June, signaling that the effects of interest rate hikes are starting to be seen. According to data from the UK Office for National Statistics, inflation fell from 8.7 percent to 7.9 percent on an annual basis in June. The median forecast of economists surveyed by Bloomberg was 8.2 percent. Inflation thus fell to its lowest level since March 2022. Monthly inflation increased by 0.1 percent, compared to expectations of 0.4 percent. The previous month, the increase was 0.7 percent. Core inflation fell from a 31-year peak of 7.1 percent to 6.9 percent, while services inflation fell from 7.4 percent to 7.2 percent. The Bank of England (BOE) raised interest rates for the 13th time last month in an effort to reduce inflation. The bank is also expected to raise interest rates by 50 basis points at its August meeting, raising the policy rate to 5.5 percent. UK Finance Minister Jeremy Hunt said in a statement after the data that inflation is declining. “It is the lowest level since March of last year. However, we are still not at a satisfactory level and we know that price increases are still a big concern for families and businesses,” he said. Futures First Canada Analyst Rishi Mishra said the figures were satisfactory for the BOE, adding that “core inflation is still high but the trend is in the right direction. Market expectations for final interest rates may decline from 6.25 percent to 5.75 percent.”