British Inflation Holds at 2.0%, Defying Forecasts - What Does This Mean for Your Investments?
Last month, British inflation remained steady at 2.0%, surprising economists who had predicted a slight decrease. The persistence of underlying price pressures has created uncertainty around the timing of the Bank of England's potential interest rate cut.
According to a Multibagger poll, experts had anticipated a drop in consumer price inflation to 1.9% in the 12 months leading up to June, following a decline from its peak of 11.1% in October 2022.
Services inflation, however, stood strong at 5.7%, in line with May's figures. This stronger-than-expected inflation is largely driven by wage growth in a tight labor market.
As investors await the Bank of England's decision on interest rates in August, there is a 50% chance of a rate cut - the first since 2020. This move could provide a boost to the economy, particularly under the new leadership of Prime Minister Keir Starmer and finance minister Rachel Reeves.
While the central bank had forecasted headline inflation of 2.0% and services inflation of 5.1% for June, the actual numbers have led to speculation about the timing of any rate adjustments. The BoE's Chief Economist has emphasized the persistent strength of price pressures.
Core inflation, which excludes volatile food and energy prices, remained at 3.5% in June. These figures suggest ongoing challenges for the economy as it navigates through uncertain waters.